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Tata Steel Ltd has announced a substantial investment of ₹17,408 crore ($2.11 billion) T Steel Holdings Pte Ltd.

Tata Steel Ltd has announced a substantial investment of ₹17,408 crore ($2.11 billion) into its Singapore-based unit, T Steel Holdings Pte Ltd. This funding is intended to facilitate the restructuring of Tata Steel’s struggling UK operations and to repay the debts of its offshore entities.

As part of this financial maneuver, Tata Steel will also write off $565 million of existing debt owed by T Steel, converting it into equity shares. This move was disclosed in regulatory filings on Wednesday by Asia’s oldest steelmaker.

The investment in T Steel, which functions as a holding company for Tata Steel’s overseas subsidiaries, will be distributed over the 2024-25 period.

Tata Steel reported a significant year-on-year decline of 65% in consolidated profit, down to ₹554 crore for the quarter ending March 31, falling short of the ₹890 crore profit estimated by analysts polled by Bloomberg.

The financial performance was adversely affected by the company’s European units, which together reported an EBITDA loss of nearly ₹650 crore. EBITDA stands for earnings before interest, tax, depreciation, and amortization.

The Dutch unit of Tata Steel experienced losses due to the relining of one of its blast furnaces, which reduced production during most of the January-March period. The UK operations have consistently been in deficit due to high structural costs, including elevated energy prices.

For the fourth quarter, Tata Steel’s consolidated revenue stood at ₹58,687 crore, marking a 7% decrease from the same period the previous year. This also fell short of analysts’ expectations, which had estimated revenue at ₹58,375 crore.

The underperformance was largely attributed to the European units, where sales volumes declined year-on-year, even as sales improved in India. In India, the company sold 5.42 million tonnes of steel, up from 5.15 million tonnes in the same quarter last year.

“FY2024 has been a year of progress for Tata Steel with transition towards stated goals in India and abroad despite the challenging operating environment,” said Tata Steel Managing Director T.V. Narendran.

“In India, which is a structurally attractive market, we have delivered improved margins and continued to expand our footprint in terms of volumes as well as product portfolio.”

Narendran noted that Indian deliveries now constitute 68% of the company’s total deliveries, with expectations of continued growth driven by the 5 million tonnes per annum capacity expansion at Kalinganagar. Tata Steel recorded its highest-ever sales in India during FY24, reaching approximately 19 million tonnes, a 9% year-on-year growth.

Tata Steel’s net debt rose to ₹77,550 crore as of March 31, up from ₹67,810 crore the previous year. The net debt to EBITDA ratio worsened from 2.07 to 3.31. The company’s debt has been increasing since the end of FY22, when a commodity upcycle had significantly helped reduce its debt. Tata Steel aims to maintain its debt below 2.5 times its EBITDA.

In the fourth quarter, Tata Steel reported capital expenditure of ₹4,850 crore. For the full year, the expenditure was ₹18,207 crore, marking a 29% increase year-on-year.

The company declared a dividend of ₹3.6 per share, with June 21 set as the record date.

Shares of Tata Steel closed 0.37% lower at ₹174.2 each on the BSE on Wednesday. The results were announced after trading hours. Since the beginning of the year, the stock has gained nearly 25%, outperforming its peer JSW Steel Ltd but trailing behind Jindal Steel and Power Ltd.

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