Synopsis: From a Rs 4,910 crore loss in FY24 to a recovery in FY25, Tata Steel is positioning for a stronger FY26. With India’s demand rising, Europe stabilising, and capacity expansion underway, 2026 could mark a decisive turnaround in its earnings cycle.
Tata Steel Ltd may be on the verge of finally reaching a turning point after only a couple of years of ups and downs because of the fluctuating steel market, losses in the European market, and pressure on the balance sheet. Although FY24 is going to be a very rough year, a positive result in FY25 and good prospects in FY26 suggest that 2026 will be one of the most robust years in this cycle. To explain that, we should understand how a worrisome trend started for Tata Steel and how it is trying hard to recover from it.
Loss to Recovery
Tata Steel Ltd FY24 proved difficult since the company realised a consolidated net loss of approximately Rs 4,910 crore, but in FY23, the company recorded a profit of Rs 8,075 crore. This loss was caused not by weakness in India, but by the losses in European operations and major one-off costs.
In FY24, Tata Steel Ltd surrendered its Sukinda chromite mine lease in India after the open-cast reserves were largely exhausted and further extraction required a shift to underground mining, which would have taken an additional 2–3 years with production remaining suspended during the transition. Existing mining regulations and MDPA targets did not provide the flexibility needed for such a pause, prompting the company to exit the mine and absorb a one-time cost worth around Rs 500 crore.
Alongside this, Tata Steel also undertook restructuring in its European operations, particularly in the UK, where it initiated the closure of heavy-end blast furnace assets and implemented employee separation schemes as part of its transition toward a greener, electric arc furnace-based model.
The UK business remained under pressure as Tata Steel moved ahead with a major restructuring plan to shift from traditional blast furnaces to a scrap-based Electric Arc Furnace (EAF) model at Port Talbot. The transition involved shutting down its two existing blast furnaces, writing down legacy assets, and incurring significant impairment, restructuring, and employee separation costs, which weighed heavily on FY24 results.
The new EAF facility, with a planned capacity of around 3 MTPA, is being developed with a £500 million support package from the UK government alongside Tata’s own £750 million investment. While the new plant is expected to be operational by late 2027 and will significantly reduce emissions and operating costs, the interim period has led to lower production volumes, reduced revenues, and elevated one-time expenses, contributing to the losses in the UK business.
These actions, including the Sukinda surrender and European restructuring, formed a significant portion of the Rs 7,814 crore exceptional loss booked in FY24, which ultimately pushed the company into a consolidated net loss for the year.
Additionally, in its unit in the Netherlands, Tata Steel Nederland was operating with a loss of approximately €556 million (~Rs 6,000 crore), which was influenced by the pricing of steel, high costs of energy and raw material and failure to produce, due to relining and delays of the initiation of Blast Furnace 6.
The result of Tata Steel India making a record 20.8 million tonnes of crude steel and being a profitable entity on its own, the losses in Europe and the extraordinary item resulted in the group recording a consolidated loss in FY24.
Nevertheless, FY25 was showing improvement. With a net profit of approximately Rs 3,174 crore, Tata Steel has gone back to profitability. Cash from Operating Activity currently stands over Rs 23,500 crore, up from Rs 20,300 crore in the previous year, which means that the company was able to better manage costs and increase realisations.
This is a recovery that is essential because steel is a cyclical business. Depending on the movements in prices and demand cycles, the earnings can go either way. When the profits recover after reaching a low point, even slight increases in prices or volumes would result in dramatically increased profits as a result of operating leverage. It may take FY26 before this recovery can be reflected in consolidated numbers.
The Real Earnings Engine
The biggest strength of Tata Steel is its operations in India. The increase in domestic steel demand is around 8 percent annually due to expenditure by the government in infrastructure, housing, railways, defence, and the manufacturing sector. The current consumption of steel is also still low relative to the world averages, which reflects growth opportunities in the long term.
Tata Steel is vertically integrated, unlike many of its competitors around the world, with the iron ore mines that give it a significant cost advantage in India. This integration assists in controlling the margin volatility in case of fluctuation of prices of raw materials. Another area that the company is working on is the growth in value-added products that tend to have a higher margin than commodity-grade steel.
Provided that domestic demand remains robust until FY26 and the pricing is maintained, the Indian segment should be able to contribute to consolidated profitability considerably.
Kalinganagar and Other Capacity Expansion
Another significant factor in 2026 is the development of the Kalinganagar plant, and the company is focused on expanding the capacity to 8 million tonnes per year from the current 7 million tonnes. Production of steel is normally of a scale. Increased capacity utilization reduces the fixed costs across a wider production base, which improves the margins.
Additionally, Tata Steel is quietly making preparations for its next growth phase with multiple additions to capacity across India. The company has received the principal board approval for a 4.8 MTPA expansion at Neelachal Ispat Nigam Limited (NINL), thereby deepening its focus on long products.
The 0.75 MTPA electric arc furnace project in Ludhiana is going ahead, with hot trials already complete and commissioning expected to take place during the first half of FY27. At Tata Steel Meramandali, there are plans to add 2.5 MTPA of finished flat steel capacity through a new thin slab caster and rolling facility.
Besides that, the company is doubling down on its west coast presence through a partnership with Lloyds Metals & Energy, which involves creating an iron ore hub in Gadchiroli and establishing a greenfield 6 MTPA steel plant in Maharashtra, initiatives that emphasise the company’s intent to scale, integrate and grow domestically in the long run.
FY26 may be the first year when this augmented capacity would materially affect both the revenue and EBITDA. In case the utilisation rates increase, and the incremental output is absorbed by the demand without any difficulties, the earnings may experience a significant increase.
It is not merely expansion in terms of producing more, but also in aspects of operating efficiency and product mix. The cost per tonne can be made better as newer and more efficient facilities take a bigger portion of the production.
Europe: Between Drag and Stabilisation
The Tata Steel European business has been a drag on the overall performance over the years. Sluggish demand, escalating energy prices, compliance costs on carbon and structural oversupply in the EU have damaged margins. Nevertheless, the trend may change due to recent events.
The European Steel Association forecasts that steel demand in the EU, which is expected to turn stagnant in 2025, may increase by approximately 3 percent in 2026. Additional support may be given by increased defence expenditure, the revival of the industry, and seriousness.
Further, the Carbon Border Adjustment Mechanism (CBAM) by the European Union should transform the flow of trade. CBAM would put an import-related cost on carbon-related imports into Europe, both boosting compliance costs and decreasing the price advantage of high-emission steel imports outside of Europe.
For companies like Tata steel where they manufacture products in Europe, this may provide them with a more even playing field. Consolidated earnings profile can be greatly enhanced in case of a reduction in losses in Europe or the business closes to breakeven.
Balance Sheet
The issue of debt has become a major concern for investors. The gross debt has been high and currently stands at Rs 95,643 crore, and it’s worth mentioning, though, that the increase in debt is not growing at a very rapid pace. Better operating cash flows in FY25 have been able to stabilise the balance sheet.
Provided that FY26 is characterised by a higher EBITDA and a stable cash flow, even slow debt repayment would have a positive impact on investors. Profit growth and financial stability are some of the factors that are appreciated by markets in cyclical industries. A more foreseeable route of earnings increase, and a constant decrease in debt would improve valuation multiples.
Macro Tailwinds.
The infrastructure expenditure in India is healthy. The government is also spending its capital on roads, railways, ports, energy sources that are renewable, as well as on urban development. The structural steel is also supported by the push of domestic manufacturing and defence production.
Any increase in the Chinese stimulus or supply adjustments around the globe may assist in enhancing steel prices. A minor stabilisation of the international spreads can positively affect margins of the integrated producers by a considerable margin. Steel does not have to be in a supercycle to perform well; it must have price stability and controlled supply.
Financials
Tata Steel group, which is among the top global steel companies with an annual crude steel capacity of 35 million tonnes per annum, reported revenue from operations at Rs 57,002 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 53,648 crores, up by 6 per cent YoY. However, on a QoQ basis, it reported a slight decline of 3 percent from Rs 58,689 crore.
Also, EBITDA stood at Rs 8,200 crore in Q3 FY26, a sharp growth of 39 percent as compared to Rs 5,903 crore in Q3 FY25. However, on a QoQ basis, it reported a decline of 8 percent from Rs 8,897 crore. Also, coming to the margins front, EBITDA margins increased by 300 bps YoY, reaching 14 percent in Q3 FY26.
Coming down to its profitability, the company’s net profit stood at Rs 2,730 crore in Q3 FY26, a staggering growth of 825 percent as compared to Rs 295 crore in Q3 FY25. However, on a QoQ basis, it reported a decline of 14 percent from Rs 3,183 crore.
Coming to its production highlights, on a consolidated basis, Tata Steel produced nearly 8.4 million tonnes in Q3 FY26, which grew by 8 percent from 7.7 million tonnes. Tata Steel India produced 6.34 percent, which is 76 percent out of this total production, and its units production grew by 11 percent YoY. The company delivered a balanced performance despite China flooding the market with finished steels exports which stood at 119 million tons surpassed the 2015 peak.
Coming to its division highlights, Tata Steel India reported a revenue of Rs 35,578 crore, an EBITDA of Rs 7,940 crore and a slightly lower net profit of Rs 3,822 crore. Additionally, Tata Steel Netherlands reported a revenue of Rs 14,001 crore, an EBITDA of Rs 570 crore. However, its UK division, which is going through a rough patch, reported a revenue of Rs 5,536 crore but due to higher expenses reported a negative negative EBITDA of Rs 742 crore.
Key Risks
Although the situation appears to be optimistic, there are still risks. Steel markets are volatile markets. The recovery could be derailed by weak prices in the global market, competitive Chinese exports, increasing raw materials prices, or the persistence of weakness in Europe.
There can be increased requirements on capital expenditure due to environmental compliance and investments involving carbon. There is also high debt, which constrains flexibility in case cash flows are weakened once again. It is a cyclical recovery story, and not a story of ever-high growth, which investors must keep in mind.
As volume, margin recovery, and financial stability all come into play in a cyclical industry, it can tend to be a rewarding stage of the cycle. In case of continuity of the current trends, 2026 might actually be one of the best years of Tata Steel in this recovery.
What might cause FY26 to be one of the top years for Tata Steel in terms of profit is the rare gathering of numerous earnings triggers happening together.
The Indian business is currently operating at near peak utilisation with strong infrastructure-led demand. Kalinganagar’s expansion is ramping up towards 8 MTPA, and additional capacity from NINL and downstream expansions are starting to strengthen volumes and product mix. Meanwhile, the pull-down from Europe is structurally lessening after the UK blast furnace shutdown and the stabilisation of operations in the Netherlands.
With EBITDA margins already on the increase to about 14 percent in the latest quarters and operating cash flow getting stronger, even a slight rise in steel prices or better cost absorption could considerably elevate consolidated profitability due to operating leverage. If these factors hold, FY26 might not only be a recovery year, but it may be the strongest earnings phase since the last upcycle, thus fundamentally changing the company’s financial trajectory.
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