Tata Steel Limited (500470) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tata Steel Earnings Call. [Operator Instructions] I would now like to hand the conference over to Ms. Samita Shah. Thank you, and over to you, ma'am.

Thank you, Sahil. Good afternoon, everyone, and welcome to this call to discuss our results for the first quarter FY '27. We declared our results yesterday, and I hope you've had a chance to go through the numbers. There's also a presentation which explains more details. . To explain -- to walk you through the results and answer any questions you may have, we have with us our CEO and Managing Director, Thachat Narendran; and our ED and CFO, Koushik Chatterjee. We will -- they will have shared some opening comments, and then we will go into Q&A. Before I hand it over to them, I just want to remind you all that the discussions today will be governed by the safe harbor clause, which is on Page 2 of the presentation. Thank you, and over to you, Narendran.

Thank you. Thanks, Amit, and good morning, good afternoon, everyone. So let me give you share some of my thoughts with you and then hand over to Koushik. So Tata Steel has delivered a resilient performance in Q1 despite the challenging operating environment. The developments in West Asia continued to disrupt the supply chain. And the Chinese steel exports of about 9 million to 10 million tonnes a month also has had an impact on international prices. Of course, this has also led to many countries taking actions to protect themselves, which -- that also has a consequence impact on the steel supply chains and on Tata Steel. Our performance in some sense is because of our ability to respond to these situations, and we have a business model which can adapt these changing conditions, and of course, the continued performance in the Indian operation has helped shore of the numbers. I would now like to make some comments on our performance in each geography. In India, crude steel production was about 5.76 million tonnes. This was lower than the previous quarter because we had some shutdown scheduled and a little bit of some operational issues, which are behind us now. In Q4, the strong delivery has also led to an inventory drawdown. And so some of the production went into building up the inventory to optimal levels across supply chain. And hence, you saw the deliveries were about [ 5.17 ] million tonnes in India in Q1. We were able to offset the impact of lower volumes because of an increase in the realization to the tune of about INR 6000, INR 5992, to be more precise over Q4. And the higher net were partly on the back of improved market prices and partly because of our ability to maximize volume in the chosen segments. So this has helped us deliver an EBITDA margin of 27%, which is higher than the 10-year average. Some of the segmental highlights are what I would like to describe now. The automotive and specialty business delivered best ever Q1 volumes. It had a 21% year-on-year growth in high-end sales. We also developed cold-rolled ultra height and sand steels DP 980. For those of you who understand the technicality of it for commercial vehicles and galvanize steel and secondary coatings for passenger vehicles and tighter tolerance specialty steel bars or transmission gas. So these developments further strengthen our position as a preferred partner in the automotive sector. As you know, we have a market share of about 50% in the auto sector. Our well-established brands are [ Tiscon ] grew volumes 33% year-on-year. supported by our extensive distribution network, which today covers 97% of India's districts. And the steel volumes also helped by the cold rolling mill in [ Kalinganagar ] grew by 34% year-on-year. And additional platforms, [ Asana and Dejka ] continue to scale with a combined GMV of around INR 2,200 crores for the quarter, which is 61% up year-on-year. We continue to strengthen our presence in the Construction Solutions business. through differentiated offerings that improve the project efficiency. In fact, it's also addressing a trend today that we see that construction workers or workers are not easily available to work at construction sites, and hence, our move towards construction solutions that we deliver is really helping many of our customers. During the quarter, we also commissioned India's first [ Superflex Welbes line at Catarina ]. And this is a first of its kind facility that can produce engineer well mesh up to 3.3 meters in width, significantly higher than the industry standard 2.4. So all these initiatives are basically aligned with what we want to do, go more downstream, go towards more and more services solutions in addition to the products that we provide and basically look at delivering convenience and an experience to many of our customers, which are aligned with what they expect. Our efforts to diversify into new segments are also yielding encouraging results, including shipbuilding, where we've got a number of approvals now. Shipbuilding like automotive is an accrual-based business. And this is broadness market opportunities for us. And the other area we're looking at is, of course, data centers. We are also strengthening our position in the oil and gas sector through international certifications that enable participation in competitive and specification products. So basically, more and more high-value approval-based businesses as well as emerging consumption sectors like data centers. Our downstream portfolio continues to build momentum with the tubes business and tinplate business delivering the strongest ever first quarter performance. Our bias business also expanded its market reach to innovative solutions such as 3D welded mesh for railway applications and [ Gajamitra ] highly high-tensile noted fencing system featuring specially designed tubular structural posts. These are being used in the south by forest departments, particularly where there are [ elephant ] corridors. And colors, the Tata Colors business, which is -- which used to be [indiscernible] continues to benefit from the infrastructure demand supplying roofing and cladding solutions for projects under the [ Amart ] station scheme. As you must have heard, we -- the Board yesterday has approved the 4.8 million tonne expansion at [ NilacilisPark ], which is central to our strategy of deepening presence in high margin and branded long products. And this is the first phase of growth at New login, and it will expand the total capacity in [indiscernible] to about 6.2 million tonnes. As far as U.K. is concerned, our delivery stood at 0.5 million tonnes. We welcome the recent revisions to safeguard measures, including a 51% reduction in tariff-free quotas and higher duties. But there are some categories like alganized steel, tubular sections, some of the packaging steels, et cetera, where the current quota locations are not fully aligned with what we think is fair because in many cases, the quotas are a significant 70%, 80% of the demand, which used to be higher than the demand. Now it's brought down, but still at a very high level. So we are working with the relevant authorities to provide industry inputs and support a calibrated approach that balances market requirements with the policy intent. In Netherlands, the liquid steel production was 1.55 million tonnes, while deliveries were 1.4 million tonnes. The temporary shutdown of our direct sheet plant has weighed on the operational performance because the direct sheet plant to DSP as we refer to it, is about 20% of our production in Netherlands, and that's been closed since the first week of April. We have just got the approval to run it for 4 weeks, starting fifth of August. And hopefully, the data that we generate through that production will help us get the permission to run it beyond that. So I think Q1 was impacted by this shutdown, but we hope that in Q2, we are able to address this issue. Finally, as far as West Asia, the developments in West Asia continued to impact energy, freight and some of the raw materials, some of the consumables that we use. We are closely monitoring the situation and taking appropriate action to mitigate the effect of our operations. With this, I hand over to Koushik for his comments. Thanks.

Thank you, Naren. Good afternoon to those who have joined in. During the first quarter of financial year '20, the global steel industry continued to navigate a complex and volatile landscape. Geoeconomic shifts, persistent supply chain disruptions,and the ongoing developments in West Asia have continued to exert pressure on input costs, energy prices and logistics. Despite these headwinds, Tata Steel has delivered a resilient performance, anchored by robust steel realizations, improved product mix that Naren talked about and ongoing cost transformation initiatives. In today's presentation, I will cover, firstly, the performance for the quarter; second, the strategic decisions by the Board; and thirdly, a commentary on the disclosures that you would have seen in the save release. I will begin the consolidated performance provided on Slide 25 of the presentation. Consolidated revenues for the quarter stood at about INR 60,794 crores and EBITDA of INR 9,370 crores. On a per ton basis, the Q1 EBITDA improved by about INR 2,400 per tonne year-on-year and by about INR [ 1,490 ] per tonne on a quarter-on-quarter basis. and is presently closing -- tracking close to about INR 13,000 per tonne consolidated, which is effectively a 15% margin. It is important to emphasize that this is after the unplanned cost increases of about INR 1,200 crores on a consolidated basis directly due to the West Asia war. We have witnessed price spikes in energy prices, freight and insurance, natural gas and logistics cost. With alternative sources and mitigation plans, we expect the impact to taper down in the coming quarters. Let us now provide a deeper understanding of the India, U.K., Netherlands performance individually. Our India business continues to be our growth engine and continues to be 75% of Tata Steel's total [ root ] steel production. In quarter 1 '27, India EBITDA was higher by 32% year-on-year to about INR 9,900 crores. India continues to deliver industry-leading margins. EBITDA margin improved significantly from about INR 15,907 per tonne in quarter 4 to about INR 19,162 stand in quarter 1. Tata Steel stand-alone revenues for the quarter stood at INR 6,827 crores, and EBITDA was INR 9,409 crores. which translates to a 26%, 27% EBITDA margin, reflecting a margin improvement of about 95 basis points on a quarter-on-quarter basis. Total revenue was up by about INR 9,212 per tonne. However, this was partly offset by the rise in costs by about INR 6,700 per tonne due to lower volumes during the quarter due to annual shutdowns and operational snags, which are now mostly resolved. Within costs, material costs were up by about INR 1,330 per tonne and conversion costs were up by about INR 5,400 per tonne on a quarter-on-quarter basis. Material costs were up due to higher coking coal cost -- consumption cost and the higher purchase of rebars from [ Nilachal Lisa ] and Tata Steel Thailand, as we optimize the value chain opportunities in the marketplace. Conversion costs moved higher due to higher iron ore royalty related expenses and the adverse impact of lower volumes, which will see better coverage through the fixed cost absorption in the coming quarters. Moving to NINL. First quarter performance was strong at about INR 498 crores, translating to a margin improvement from about 27% in quarter 4 to about 29% in quarter 1 leveraging operational excellence and the commercial strategy of the Tata Steel ecosystem. Moving now to the European operations. I would like to comment on the local market dynamics before moving on to the performance. Steel prices in the U.K. have moved higher in the last few months on the back of policy developments. U.K. reduced tariff-free import quotas by about 3.3 million to 3.4 million tonnes effective first July and applied a 50% tariff on imports beyond quota levels. While this provides near-term support to the domestic supply chains, as Naren mentioned, we have highlighted to the U.K. government that the measures fall short of their initial proposals and have requested that the quotas should be revisited to reflect the prevalent market conditions, demand situations across product categories and not just the total steel volume basis. In the EU, the Titan EU safeguard system announced last year on effective first July is designed to complement the [ CBAM ]. and together, these measures have helped reset the European steel prices and will improve preference for local steel supply over the next few quarters and going forward. However, the near-term market momentum remains a bit subdued in part because of the average -- more than average inventory levels and subdued demand on the underlying basis. In July, the European Commission reviewed the EU ETS and has opted for a slower phaseout of the CO2 emission allowances. The proposal is still aligned with the EU climate law, targeting about 90% net reduction in GHG emissions by 2040, but has slowed the pressure for the pace of industrial decarbonization in the near decade. We continue to monitor the developments in both geographies and are engaging with the authorities on the safeguards and the upcoming U.K. [ CBAM ] framework. Moving to the financial performance for the quarter. The U.K. business continued its steady progress to improve its performance. The EBITDA losses have now narrowed down from minus 48 million in the fourth quarter to minus 27 million in the first quarter, marking the fourth consecutive quarter of improvement. U.K. revenue stood at about 484 million and increased by 3% or 15 million on a quarter-on-quarter basis despite drop in volumes. The uplift was driven by higher net realizations to the tune of about GBP 91 per tonne. This was partly offset by the rise in the total cost to the tune of about GBP 54 per tonne leading to an EBITDA improvement by about GBP 36 per tonne. On June 3, 2026, there was a major fire at the Port Talbot pickling line. All personnel were safely evacuated with no injuries, reflecting strong safety protocols. We are preparing for the insurance recovery process to recover some of the damages due to the fire. To mitigate the impact, Tata Steel U.K. expedited the restart and ramp-up of alternate facilities, the [ Lana ] coal mill and the pickle line. In quarter 1, the volume impact on account of the fire was about 10,000 tonnes with an EBITDA impact of about GBP 5 million. There is a ramp-up process for the [ Land ] mill with new shifts being added to offset some of the volume impacts. And we hope to ensure that by quarter 3, quarter 4, we should be in on normal levels. With relation to the 3 million tonne scrap-based electric arc furnace, our site works construction and equipment sourcing is largely on schedule. We have completed the groundworks, 35% of the piling and the ordering of all major OEM packages. Close to half of the equipment to be delivered has already been manufactured and is readying in parts for delivery. We have previously said that there will be some delay in the delivery of the new high-voltage connection by National Grid. And we are continuing to work very closely with them and the other authorities to mitigate the delay. Moving to Netherlands, we were affected by the loss of the finished steel production due to the shutdown of the direct ship mill plant, which Naren mentioned and for almost a full quarter due to the exceedance of chrome emissions in the line, beyond the specified levels. The direct sheet plant annual capacity is about 1.4 million tonnes, which as Naren also mentioned, 20% of our total volumes. This disruption has impacted the overall volumes and fixed cost absorption this quarter and hence, the profitability as well. The plant is expected to start for an extended 4-week trial early next week after the completion of the remediation process in close coordination with the regulators. Trial results have been promising so far. And then this extended run should provide sufficient information to allow the line to come back into full production in the ordinary course. Revenues for the quarter was about EUR 1.4 billion. On a per tonne basis, the revenue was up by about EUR 87 per tonne, but this was more than offset by the rise in the cost to the tune of EUR 118 per tonne on a quarter-on-quarter basis, largely due to the volume loss, coupled with the increase in the raw material cost. EBITDA for this quarter was at about EUR 4 million. On business in Netherlands -- our business in Netherlands continues to navigate through certain uncertainties relating to the environment, regulatory and legal issues. The difficulty we see is that being the only steel company in the Netherlands, there are often no relevant reference points. And sometimes, the local regulatory standards are set beyond the EU norms or those applicable elsewhere in the industry. Since 2020, we have implemented substantial measurable improvements at our [indiscernible] operations. The number of the so-called undercooked coke incidence, which is subject for example, the criminal investigation on TSN; has been reduced by 98%, and the occurrence rate now stands at less than 0.01% of the total pushes, which is below the industry average. TSN CO2 intensity stands at approximately 1.66 tonnes of CO2 per tonne of crude steel, placing us amongst one of the most lowest CO2 -- integrated CO2 producers in the world or steel producers in the world. Therefore, while some of the compliance issues are being addressed and mitigated, some technical standards and requirements are both technically challenging and without precedent. We are working with all stakeholders, including the province, regulators, communities and the Netherlands governments to address these challenges. Moving now to cash flows. We spent about INR 3,579 crores in capital expenditure during the quarter, of which majority was in India. Our recently completed capacity expansion in Phase 2 of [ Kalinganagar ] with 5 million tonnes and 0.75 million tonnes of EF in Ludhiana are ramping up well and have been complemented by the earlier announced focused investments in the downstream facilities that Naren again mentioned, further strengthening our product mix and reinforcing our leadership in the chosen segments. In line with the growth strategy indicated earlier, the Board yesterday accorded the final investment approval for the 4.8 million tonne expansion in long products capacity covering wire rods and rebars, including solutions beyond that. at the I&L side for an investment of INR 33,873 crores towards the core project of the steelmaking steel capacity expansion. This will take the site to 6.2 million tonnes at the end of the first phase of the expansion as part of the overall strategy to build 10 million tonnes in that site. We are also expanding our iron ore mining capacity in the MBK mines, which are part of NINL by 15 million tonnes per annum of iron ore in phases. The merger process of NINL with Tata Steel is also progressing as per plan and is expected to be completed by the end of the current financial year. Our previously announced expansions in downstream capacity are progressing well. The 300-kiloton capacity expansion in tinplate and the hot-rolled pickling and galvanizing project of 0.74 million tonnes are both on track for completion within the next 30 months. The 0.5 million tonne [ Combimill ] in Jamshedpur has been commissioned and is midway through its ramp-up. We plan to add about 0.42 million tonnes of tube capacity also during the financial year '27 through an asset-light model. On the balance sheet, the net debt stands at about INR 84,000 crores and the net debt to EBITDA comfortably at 2.3, which is within our stated range of 2.5 to 3x through the cycle. The stated range of net [ swith ] factors in the funding requirements for all the ongoing and recently announced expansion projects. Our group liquidity remained strong at about INR 45, 950 crores, which includes about INR 13,200 crores of cash and cash equivalents. This provides significant financial flexibility to fund our growth and our upcoming projects. Our annualized return on invested capital for this quarter in India is about 27% and on a consolidated basis, is about 15%. With this, I will end my presentation and open the floor for questions.

[Operator Instructions] The first question of the day is from Vivavzuci of JPMorgan. please go ahead.

The first question is on the European prices. So our expectation was that prices will keep narrowing the gap between U.S. prices. But so far, they have been stuck around EUR 700 per tonne and demand continues to be weak. So as we get into the restocking cycle later in the year, do you think that will be sufficient to drive a significant uptick in prices?

Let me answer that. I think what we are seeing currently is a lot of disruption that has happened on the regulatory front. So people have been stocking up. And as I mentioned that the inventory levels are significantly higher than the average levels. We see that as we move into the -- deeper into the year, there is an uptick, especially when the contract renegotiation season starts in November that due to the [ CBAM ] impact as well as the quota impact because we should be mindful of the fact that 18 million tonnes out of the 30 million tonnes will be only available for imports. So therefore, that's almost about 47% of the actual volumes imported will be taken out from the market, leaving the domestic market to supplies to come in, which is the -- one of the biggest triggers that we see beyond the CBAM. So that -- so I think there is still fairly long runway as far as price increases are concerned in the European market. But it will happen in phases incrementally rather than a sharp uptick because this is a structural change that is happening in the European market.

Okay. Okay. Got it. That's helpful. Second question is on the U.K. So how should we read your overall comments that U.K. prices are $100 per tonne premium over EU. But of course, the safeguard quotas haven't been very effective in cutting down imports and just applicable on certain products? And broadly tying into the fact that you had guided for a potential EBITDA breakeven in second half, so do you still see it achievable? Or it's contingent on the negotiations that are going on with the government?

So based on -- our hypothesis was fundamentally based on the initial proposals that were given. We still believe, as we see that the prices have increased, there are certain segments of value-added products like galvanize in U.K., which still has got very high quotas, especially in relation to the Southeast Asian and Asian mills. And that is what we have been basically talking about. I think there is still runway to increase. And our guidance is on -- when we said that -- I think Naren mentioned last time that we are moving towards EBITDA breakeven, that is still on course. There is some heavy lifting we have to do also internally. But maybe irrespective of the change in the quotas, we should minimizing it to almost breakeven, is what our view is. Maybe pushed by 1 quarter, may not be in Q2, but Q3, Q4 and the second half, we should be able to be closer to breakeven. So I don't think we've changed our goal post. The prices are helping, but we need to see. As I said, that the contract reveal that will happen from November onwards will also be an indicator as to how the price increases are sticking. Naren, you want to add was invested -- the question was effectively the two questions. First 1 was on European prices, which I answered. That will -- does it have more runway to increase given the muted demand. The second one was in the U.K. that are you still guiding for a neutral EBITDA in the second half?

I think in the U.K., as Koushik said, every quarter is getting better than the previous quarter. The trajectory holds. I think the speed is what we have struggled with a bit. But hopefully, the trade actions do not fully what we wanted is helping us and bringing U.K. prices to close to European prices, if not slightly better, which is what it was historically. But for the last year or so, it has been well below European prices. And we are happy that, that is what interest. And European prices are also moving up closer to the U.S. prices, which traditionally used to be $100, $200 less. And now the gap is almost $400 -- $300, $400. So I think we are seeing a rebalancing of prices, and we have been talking about this for some time and which not only reflects the cost in those markets, but also addresses the high imports, which was there both in Europe and in the U.K. I think in Europe, also with the quotas coming down to 18 million, this almost stability as far as imports is concerned and in U.K. as well because of these actions, there is some support at least for hot-rolled coils, et cetera.

The next question of the day is from Parthiv Jhonsa of Anand Rathi. Parthiv, please proceed with your question.

Hi, good afternoon, and thank you for the opportunity. So my first question is pertaining to the Maharashtra CapEx, right? Because in the annual report, you have mentioned that the Maharashtra CapEx will be somewhere around 6-odd million tonnes. However, in the presentation and the press release that has been trimmed down to 5. So is that so that you've finalized some plan around Maharashtra? Is that the thing? And the second part of this particular question is related to NINL. Now that NINL is moving, say, from almost about 1 million tonnes to 6.2 million to whatever CapEx we have announced, the CapEx works out to almost about 33% higher than the last leg of CapEx. So what you do that cutting another basically. So what is the difference? Because both -- so I just wanted to get your understanding on the CapEx front, actually.

Yes, go ahead, Koushik. .

So first one in Maharashtra, I think based on the land that we are talking about, it was -- it's about plus 3,000 acres is what we are targeting. Our -- if you look at our Lingang Phase 2, we actually had 1 blast furnace, which was by million tonnes. And from a -- if you look at it from a productivity point of view and from an asset efficiency point of view, our view is that we will go in that copy plants of 5 million tonnes, and that is the reason. So the total Maharashtra volume eventually in phases will can take in somewhere around 15. We have not started the engineering work or worked to that effect. But it will be somewhere around 15 million tonnes. That's the capacity -- the land capacity. And therefore, from an asset efficiency point of view, it will be effectively 3 blast furnaces of [ 5 5 5 ] each. So that's the the recalibration because when the 6 million tonne was tough award, we had talked about 3 plus 3. But given our experience of using large blast furnaces, it is more productive to use larger blast furnaces in -- rather than multiple smaller ones. That's the reason for [ 6 5 ]. The point that you mentioned on NINL. And NINL, you should actually look at it as a greenfield project. Phase 2 of Kalinganagar was a bolt-on from Phase 1. A lot of enabling facilities of the calling another 8 million tonnes was also done in Phase 1. So I think it is important to understand that between the several enabling work that is required on the site on the layout environment conditions to be compliant, et cetera, all of this and the size of the plants and the number of mills that we have because in Phase 2 in Kalinganagar, we did not have to do the HSM because that was already there. We had to just expand the capacity. So it's an asset optimization process and the phase -- and the NINL needs to be looked at more like a greenfield

And the other thing to add to what Koushik said is if you look at the exchange rate and for all the equipment that you buy from overseas, that's also changed significantly in the last 10 years. So whether it's Phase 1 Kalinganagar Phase II or now [indiscernible], so the dollar exchange rate also has an impact on the capital cost for the imported equipment. .

Thank you so much, sir. my second question is pertaining to your captive mines basically now that in annual depot also, you have mentioned that 50% of the requirement post 30 would be met through either NINL or a couple of other mines, what you would still have post 30. So I just wanted to quickly get your understanding, what is the kind of cost savings or maybe the kind of delta what we should build in, considering that you still have 50% of the mine beyond 2030? And will this 50% ratio still hold when you basically hit a 40 million tonne target basically?

Yes. So if you look at iron ore, today, we are maybe about 45 million tonnes, going to 50 million tonnes, okay, of iron ore production. And I would say 90% of that production is actually coming from our old mines, The existing -- the newer mines, which is [ Gandara ], what we call MKB, which is the [ Nilachal ] mine or [ Kalama ], which we got to the Bushan acquisition; so these are today producing less than 5 million tonnes. Over the next few years, we expect to take this to about 30 million, 35 million tonnes, okay? So that's a work which is going on currently. Obviously, the cost of iron ore from those mines will be higher than what we have today because some of them are with zero premium, some of them are with high premium. The qualities are different. [ Candela ] mine is high premium, but it has very low alumina. So that has a value and use benefit, et cetera, et cetera. So it's not just a pure iron ore cost, we look at the value news, we look at the quality. The reason why we said 50% captive is because if you had 30 million, 35 million tonnes and you need about 60 million tonnes of iron ore, then you at 50%. We can always bid for the mines. Our own mines, which are coming up for auction as well as any new mines. But we also want to look at the cost of having captive because having captive ore is not an end in itself. It should be competitively priced. And if people are paying 120%, 130%, 140%, then it becomes a bit difficult to justify that kind of a cost. You need some iron ore supply to keep the plant running without disturbance. But otherwise, you can buy it in the market rather than pay 130%, 140%. And at 140% premium, honestly, imports also becomes an option, right? So that's why we said having 100% captive is not an end in itself. We will evaluate the economic value of being capital and then take a call on what proportion of our ore should be captive and what proportion of it should be bought from the market.

The next question is from Sateri Jain of Ambit Capital. Sadie, please proceed with your question.

Thank you. The first one, Netherlands, just maybe more for understanding. So the cast iron rolling mill, you're saying 20% of the production is impacted. Where the remaining casting and rolling operations don't have high chromium stakes? And when you transition to DRI EF, will that not be -- will you still not have challenges there in case some of these things are not -- there's no resolution? Even if you transition those issues will remain. And this an undercooked, I know there's a hearing on 20th November. Is there a criminal case against executives also? Or is it mainly company? We don't really know the full extent of what the investigation is. And in light of everything that you're seeing in Netherlands and the easing of LRF and all, are you less enthused about Netherlands in general or Europe? Or would you look -- is there a possibility of looking at another -- if you are so positive about Europe, why Netherlands? Is there a possibility of looking at some other countries? You're saying there's only one mall and you're facing challenges there? Just trying to understand how you're thinking about it.

So let me start, and then Koushik can complete what I've not covered, right? So more specifically to your question, this is a specific emission related to our DSP or direct sheet plant, which is basically what in India, you call a thin slab caster and rolling, it is similar to that. So the emission is coming out of the tunnel furnaces that are unique to this way of producing steel where the slab is cast and immediately rolled in the hot strip mill. So there's a tunnel furnace, which connects those labs to the hot strip mill. And these are from the roles -- the kind of roles that you use in those tunnels, right? So this was not a measurement, which we were doing earlier. We -- as we did the full audit of what are all the measurements that we need to do, we came across this. We found some deviation. We proactively informed the authorities in the interest of transparency because that was something that we were trying to do, so that we work more transparently with the authorities. So it was something that we noticed. We discussed with them. And the -- then they said it's better to shut it down until we solve the problem. So we have -- we feel we pretty much solved the problem because we've changed all the rollers. There are dry rollers and wet rollers. And so we've changed those rollers. So the emissions today seem to be under control. The authorities have given us a permission to start the plant again on the fifth of August and run it for a month. and do the measurements. And we are confident that it should be within what is expected. And hence, we should have the permission going forward. So it doesn't impact the other parts of the plant because they don't use the tunnel furnace. It doesn't impact anything new that you may build because that also doesn't use these furnaces. And now even if you use these furnaces, now you know what are the chrome emission levels for these kind of roles and so you will make the right -- use the right roles, et cetera. So I think this is a unique kind of problem, which we are pretty close to addressing. The second point I think Koushik alluded to in his comments, the concern we have in Netherlands is that some of the expectations are beyond what any other steel company in Europe, forget rest of the world. I'm just saying; even in Europe, other steel companies are not expected to meet the levels that we are expected to meet in Netherlands. And that is a conversation we're having with the government and the regulatory authorities. The law maybe that we need to look at then is that being fair to us because ultimately, we have to compete with the other steel companies in Europe. So that's a conversation going on with the authorities to see, can we be fairer? Can we have a more level-playing field as far as emissions are concerned? Because some of it are technically not -- nobody has done it. So we need to find a technical solution. And obviously, some of these will have an impact on the operating capability or the cost, et cetera, et cetera. So there are -- it's a complicated conversation. I think we feel in many metrics, we are amongst the best in the world. Like CO2, as Koushik said, we are in the top 3 in the world through the blast furnace route at 1.66. I'm just giving you a sense, in India, the average is 2.2, right? In the rest of the world, it is 2. And in Netherlands, we are at 1.68, right? So that's a level at which the CO2 emission is. On many other emissions, caster emissions, et cetera, we are already at levels which nobody else is, right? So these are the challenges. Having said that, the narrative in Europe is because, as I said earlier, the European market, like the U.S., is also trying to support its industry and make sure that unfairly priced imports are not in some sense, destroying value for the industry. And hence, the reduction in quota is welcome. The [ CBAM ] is, again, making sure there's a level playing field because European steel producers pay a carbon tax, we pay a carbon tax. So anyone who sells in Europe is also required to pay the carbon tax. It's an equalization kind of thing. So we see that -- and the third thing is in Europe -- as a geography, there's more investment in manufacturing in defense, in infrastructure, et cetera. So we do see these actions helping the European steel industry going forward. And hence, the point we're making is the European steel market should be more attractive going forward than it was in the past. From our point of view, we feel Netherlands asset is one of the best sites in Europe, not only for many metrics of performance, but also because it's a coastal plant. There are very few coastal plants in Europe, we are one of them. So if Europe has to make steel actually, Netherlands and our Dutch plant is one of the best places to make steel because it's well positioned. And that's why we feel that amongst the locations in Europe, we are already in one of the best locations from a steelmaking point of view. And hence, would like to be there if we can address all these issues. So that's a conversation going on with the authorities. In terms of the financial numbers, yes, I think Koushik mentioned that during the time when a result, we expect Q2 to be better than Q1. We -- the benefits that we started getting out of the prices were washed away because of the DSP and because of some of the other impacts, but we expect volumes and EBITDA to be better in Q2 than Q1, lower than what we would like it to be, but certainly starting to move in the right direction. Maybe Koushik, you can add to what I said?

Yes. So I think I'll just add to respond to Satari, your questions on the DRI EF and other countries to invest, et cetera.

And also, Koushik, on the November 20, I missed that.

Yes. So I think the first point is there are certain here and now challenges as we are seeing. And those challenges, if you look at us with disclosures, we are pretty copious about those challenges. The first one is in relation to the coke and gas plant, and then there is the direct sheet mill, which still -- which kind of just is getting addressed. Then there are the emission cases, which are relating to green pushes. And as I just mentioned, that there's only [ one ] green push at this point of time, and we are certainly much, much below the industry standards. So as of now, as far as the cases are concerned, the public prosecutor, as said, we intend to go forward in the case. We have our defense, and I think we have our data and position on the defense. They have -- it's essentially on the company. We have heard about the fact that they can be people named but not named as yet. So we will just see as to how this unfolds. But I think we have all the difference available for us to fight this case out. Second point, I think as part of our last year's nonbinding LOI with the government, there were certain conditions on both sides. And slag is one of those conditions. And slag is something that is also not only a future issue but also here and now. So there are two regulators involved with different views at this point of time, so which is what we are working again. So in a nutshell, you can say that we are currently reassessing or assessing the situation with all stakeholders to understand the investability of the DRI EF, the regulatory framework, within which there is not just an investment case, but also a sustaining case because these investments are done for 20, 25 years. And therefore, we are looking at the overall risk-return reward profile and assessing that in the context of the investment proposal that we have. We have done a fair bit of -- almost all of it, the engineering strategy. So we know now exactly what needs to be done. But we will not move until we have clarity on many of these things. So that is how we are. And finally, it has to make the investment and the business case, it has to have a return which works. I think what Naren mentioned rightly is the point that the European market is expected to be better than before, but there is also the issue in relation to the sustainability of the business. and the -- whether the bang for buck is there for new investments. So that is dependent purely on the regulatory side. As you are aware and as I mentioned, that the EU ETS is also now stretched down. So that also will have some impact on the investability because the [ CBAM ] will be lower, given the curve. And if [ CBAM ] is lower, then it impacts the investment case. So to what extent is what we are working around us now. And a lot it will depend actually on the quota moving forward, which has been announced. And finally, is the certainty on the regulatory standards and framework within which we can operate. So all of this is being considered. And as I mentioned, we are deeply involved with all stakeholders to understand before we take any decision one way or the other.

Thank you for a detailed answer. Just one quick question on India. What is the timeline for NINL commissioning? And you have the EAF now commissioned to the [indiscernible]? Just maybe if you can share some economics of -- I know it's just very early in the process, but how do we look at profitability for Ludhiana? And what's the timeline for NINL commission you're looking?

Yes. NINL is 48 months is what we have committed that within 48 months, we'll have the plant up. As far as Ludhiana is concerned, so it's a different operating model. As you know, the Lugana model is based on the fact that you will collect scrap locally and sell steel locally. So the whole model is about collecting steel scrap from within 300 kilometers of Ludhiana plant and selling steel within 300 kilometers. So what you pay more in terms of higher cost because, obviously, making steel through an electric [ car ] furnace is more expensive than making steel through a blast furnace. So some of that cost disadvantage you offset through the saving on logistics cost. Otherwise, you would spend INR 3,000, INR 4,000 moving the steel from Jamshedpur or [ Nilachal ] to the Punjab area, right? So that's a model. Second part of the model is in anticipation that there will be some sort of carbon cost in India going forward, right? So our whole objective of getting from a linear value chain to a circular value chain over a period of time is to say that, even if 5%, 10% of our production is through the recycling route, it's good for us to have that part of our footprint going forward. It makes sense from a CO2 emission point of view, CO2 emission at Ludhiana will be 0.3 tonnes compared to 2.2 in Jamshedpur, right? So that's the difference it has. So that's the whole model as far as we are concerned. So beyond that, I think some next year this time, we will have a full year of production, and we'll be able to come back with more specific numbers. The other thing to keep in mind is the Ludhiana plant was built in 2 years. It is a INR 3,000 crores CapEx for a 0.85 million tonne plant, right, steelmaking and rolling plant, right? So if you look at it from a CapEx efficiency point of view and time efficiency point of view, it is much quicker than an integrated steel plant. So there are pluses and minuses that we need to weigh. But we are quite confident this model works. And hence, we are looking also at building a similar plant in the West and in the South. And like I said, you need 100, 150 acres of glad, you can build it in 2 years and add 0.8 million, 0.9 million tonnes, yes.

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

First question is, if you can share what is the NSR movement expected, given how July is panning out and -- across both India, U.K. and Netherlands and also a usual commentary on the cost changes that we are expecting?

So I'll give you a guidance on the prices and maybe Koushik can comment on the cost. So as far as prices are concerned, last quarter, we had guided in India, INR 6,000 increase, which is pretty much what we got. This year -- this quarter, we are saying will be about INR 1,500 lower than Q1 in India. Obviously, some areas like in long products, the drop between April and July is much more than in flat products. flat products are also holding out a bit because the auto demand has been very strong. Long is impacted by construction, activity slowing down during the monsoons. But I think we mentioned before here, while there will be some margin compression in India because there will be additional volumes in Q2 compared to Q1, we expect the rupees crore to be better in Q2 than in Q1 in India. As far as U.K. is concerned, I think we had guided GBP 80 increase quarter-on-quarter, Q1 compared to Q4, I think we delivered a GBP 90 increase. And as far as Q2 is concerned, it will be another GBP 80 is what we're expecting Q2 over Q1. But it doesn't all flow to the margins because U.K. has set out a substrate. And so the substrate costs will also go up to reflect market, right? So it's not that the entire GBP 80 will flow into the bottom line. So that's one mention I want to make. As far as Netherlands is concerned, we had guided EUR 80, and I think we delivered EUR 70 last quarter. And this quarter, the guidance is about EUR 10 per tonne increase. As Koushik mentioned, in Europe, we are more -- a lot more impacted by contracts because you have long-term quarterly -- so some of the flow happens over a period of time. In India, I also want to add that we will get some of the benefit of the auto increases that we got because most of that was negotiated towards the end of Q1. And so all the increases, some of it is flown through into Q1 numbers, some of it will flow through into the Q2 numbers. But the 1,500 drop has factored all that in. Yes. Koushik, do you want to talk on the cost side?

Yes. So I think the -- if I were to look at from a spread point of view, which would possibly help you better, so I think we will see spread expansion in U.K. in the second quarter between the substrate and the HR because we are seeing improvement in the prices. The Netherlands spread is ballpark going to remain the same. And as Naren mentioned, we're going to get some of the benefits on the revenue side in Q2. As far as the coking coal consumption cost is concerned, I think we will be at about $184 per tonne kind of levels. And that is the -- I think we've been able to manage the increases in the consumption cost from a coking coal perspective from a mix perspective. So broadly, that's the inputs that I would like to give.

Yes. Koushik, 184 is versus what in [indiscernible]?

184 was skew to -- Q4 was 160, Samit, right?

Consumption cost in Q2 for coking coal in. India will be about $5 higher and for Netherlands will be about $10 Q2 to Q1.

Got it. That's very clear. For NINL &L expansion, we said 48 months. So is the zero date already stay from today? First August, okay. And got that. And the mine will be parallel developed? Or are you expecting any...

In phases. But I think it will be -- if I were to talk the expansion of mines, it's not covered in the CapEx that I talked about. It is in addition to that. But as Naren mentioned, that we are expecting more mine development from the 3 mines that are much smaller currently. It will be concurrent to decommissioning as far as the steelmaking is concerned.

Understood. On the iron ore topic itself, I mean, since 3, 4 years down and we are -- we will see a very massive transition. Is it possible to share, I mean, what could be the blended cost increase if we take today's market price maybe at an or steel level? .