Tata Steel overtakes TCS as most profitable Tata Group company

Tata Steel has pipped Tata Consultancy Services (TCS) as the salt-to-software conglomerate's most profitable company in the financial year 2021-22.

India's largest steelmaker clocked a consolidated net profit of ₹41,749 crore in the last fiscal, overtaking that of TCS, the country's largest software services provider and the crown jewel of Tata Group, which posted net income of ₹38,327 crore during FY22.

Tata Steel reported a consolidated net profit of ₹9,835 crore in the fourth quarter ended March 2022.

It posted its highest-ever earnings before interest tax depreciation and amortisation (EBITDA) of ₹ 63,830 crore in the last fiscal. The company's net debt declined to ₹ 51,049 crore from over ₹1 lakh crore in early 2020. The net debt to EBITDA improved to 0.8 times and net debt to equity improved to 0.52 times.

Consolidated free cash flow of the company stood at ₹27,185 crore despite an increase in working capital of ₹9,618 crore, capex of ₹10,522 crore and taxes of ₹11,902 crore, Tata Steel says in its earnings release.

"We have closed the financial year with consistent and record operating and financial performance for the year, surpassing the previous best in FY21, with EBIDTA being 2x and profit after tax being >5x the previous year. This is despite the significant surge in international coal prices and inflationary impact of various commodities," says Koushik Chatterjee, chief financial officer at Tata Steel. The company's full-year consolidated revenues stood at ₹2,43,959 crore and EBIDTA was ₹63,830 crore which works out to a margin of 26% and EBITDA per tonne of ₹21,626, he adds.

Tata Steel's annual crude steel production grew 13% year-on-year to record 19.06 million tonnes from its India business. Broad based improvement in sales volume was witnessed across segments, the company says, adding that the automotive segment jumped 27% YoY while branded products and retail and industrial products and projects grew 11%.

"Our Indian business showed broad based growth across our chosen segments due to our sustained focus on customer relationships, our distribution network and our portfolio of brands supported by our agile business model," says T.V. Narendran, chief executive officer and managing director, Tata Steel. "We have pursued several initiatives to de-risk the business particularly across procurement and supply chain."

The steelmaker said its 6 million tonnes per annum pellet plant at Kalinganagar will be commissioned in the third quarter of the ongoing fiscal.

"Kalinganagar expansion is progressing well and will drive cost savings as well as product mix enrichment. The acquisition of Neelachal Ispat Nigam Limited will be closed in 1QFY23 and we will scale it up rapidly to drive expansion of our high value retail business," Narendran adds.

The board of directors of the steelmaker announced a dividend of ₹51 per share and also proposed a 10-for-1 split of the steel major's equity shares.

This comes at a time when prices of coking coal, which accounts for around 40% of steel making cost, have doubled due to the Russia-Ukraine war.

In March, Fortune India reported that Tata Steel's plan to double its capacity to 40 million tonnes (MT) is expected to entail an investment of around ₹1 lakh crore. The company plans to complete the expansion by 2030.