Tata Steel India Growth and Europe Recovery Support Earnings Outlook

Investment View and Valuation

In its November 8, 2026 results update, ICICI Securities retained its BUY recommendation on Tata Steel with a target price of Rs 235. The broker views India as the principal earnings anchor, with a gradual recovery in European operations expected to supplement growth. The target price is based on 7x FY28E EV/EBITDA.

Consolidated Q2FY27 Performance

Consolidated Q2FY27 EBITDA was in line with ICICI Securities' expectations. The increase in EBITDA and margin reflects improved operating performance, while adjusted PAT declined year on year despite growing sequentially.

Resilient India Operations

Tata Steel India standalone EBITDA was Rs 10,012 crore, up 23% YoY and 9% QoQ. Deliveries rose 16% QoQ to 5.98 million tonnes. EBITDA per tonne was Rs 16,742, up 14% YoY but down 6% QoQ.

Management expects H2FY27 to outperform H1FY27, supported by stronger seasonal demand, higher volumes, improved fixed-cost absorption and operating leverage. It guided for Q3FY27 India realisations to increase by Rs 3,500 to Rs 3,600 per tonne QoQ, although coking-coal consumption cost is expected to rise by around USD 15 per tonne.

India Expansion and Cost-Savings Programme

Management is progressing with the 4.8 million tonne NINL expansion, targeted for commissioning by FY30, alongside the 0.7 million tonne HRPGL project and doubled tinplate capacity. Downstream penetration, value-added products, and expansions at Kalinganagar and Meramandali are expected to support domestic growth.

Tata Steel targets iron-ore sales of 8 million to 10 million tonnes in FY27 and 14 million to 15 million tonnes in FY28. Captive mines are expected to meet around 50% of iron-ore requirements beyond 2030. The company targets Rs 7,000 crore of cost savings in FY27, of which Rs 1,800 crore had been achieved in H1FY27.

European Operations: Recovery and Execution Monitorables

European recovery remains an important but execution-sensitive part of the investment thesis. Netherlands EBITDA improved to EUR 72 million in Q2FY27 from EUR 4 million in Q1FY27 after the Direct Sheet Plant restart, with the plant operating at rated capacity. However, the Netherlands decarbonisation roadmap remains subject to regulatory and investment clarity.

Tata Steel UK continued to report an EBITDA loss of Rs 719 crore as deliveries fell to 0.38 million tonnes. Management expects UK volumes and fixed-cost absorption to improve as elevated inventories normalise, targeting near EBITDA break-even by Q4FY27. Execution of the 3.2 million tonne electric arc furnace project remains a key monitorable.

Earnings Outlook and Leverage

ICICI Securities forecasts Tata Steel EBITDA of Rs 44,348 crore in FY27E and Rs 51,432 crore in FY28E, with EBITDA margin rising from 14.8% in FY26A to 17.1% and 18.0%, respectively.

Net debt stood at Rs 91,420 crore in Q2FY27, compared with Rs 84,200 crore in Q1FY27. Management remains comfortable with net debt to EBITDA of 2.3x to 3x, indicating that rapid deleveraging is not a near-term priority amid growth capex.

Key Risks

• Higher coking-coal costs.
• Weak UK volumes and delayed European inventory normalisation.
• Regulatory uncertainty in the Netherlands.
• Leverage and the pace of deleveraging amid growth capex.
• Execution risks in India expansion projects and the UK electric arc furnace project.