Tata Steel Reports Robust Q3 Performance, Eyes Stronger Q4
Tata Steel Ltd has delivered a solid performance in the December quarter (Q3FY26), with consolidated EBITDA, adjusted for foreign exchange translation, rising by 15% year-on-year to ₹8,200 crore. This growth came despite a more modest 6% increase in revenue, which reached ₹57,000 crore. The company effectively managed to offset ongoing losses in its UK operations through a combination of lower raw material costs, significant gains from cost-takeout initiatives, and higher production volumes.
Standalone Performance and Volume Growth
On a standalone basis, Tata Steel's revenue saw a 9% increase to ₹35,600 crore. The company achieved a notable 14% growth in volumes, although average realizations declined by 4.5%. This limited the adjusted EBITDA growth to 5%, amounting to ₹7,900 crore. Consequently, EBITDA per tonne decreased by 8% to ₹13,090, reflecting the challenging pricing environment during the quarter.
Positive Outlook for the March Quarter
The outlook for the March quarter (Q4) appears significantly stronger, driven primarily by higher domestic steel prices following the imposition of a safeguard duty in December. Management anticipates that realizations will improve by approximately ₹2,300 per tonne in Q4. However, this positive impact will be partially offset by an increase in coking coal prices, which are expected to rise by $15 (around ₹1,350) per tonne. Volume growth is projected to remain consistent with the levels seen in Q3.
Global Triggers and European Market Dynamics
Europe is poised to provide a pricing lever starting from the second half of the year. The European Union's Carbon Border Adjustment Mechanism (CBAM) became effective on January 1, requiring importers to purchase carbon certificates for steel shipments. Additionally, a nearly 50% reduction in tariff-free steel import quotas and an increase in import duty to 50% from the previous 25% will be implemented on July 1. These regulatory changes are expected to bolster European steel prices, providing a supportive environment for Tata Steel's operations in the region.
In response to these developments, Nuvama Institutional Equities has raised its EBITDA estimates for Tata Steel for FY27 and FY28 by 5% and 7%, respectively. This revision is based on expectations of higher steel prices and improved profitability in the Netherlands.
UK Operations and Domestic Expansion Plans
The UK may also introduce safeguard measures to protect its domestic steel industry, which continues to face severe financial stress. In 2025, the UK government took control of two steel plants to prevent their closure. Tata Steel management has indicated that spreads would need to increase by £100 per tonne (approximately ₹12,300) for its UK operations to achieve profitability.
On the domestic front, Tata Steel is set to commission its 0.75 million tonnes per annum (mtpa) plant in Ludhiana next month. Larger expansion plans, totaling 7.3 mtpa, are scheduled for completion by FY30. According to Nuvama, "Post-FY27, Tata will log 2-3% volume growth, as benefits of the next phase of expansion shall accrue FY30 onwards."
Market Performance and Future Trajectory
The imposition of an interim safeguard duty in April 2025 has contributed to a nearly 50% gain in Tata Steel's shares over the past year. Currently, the stock trades at about 7.4 times its FY27 estimated EBITDA, based on brokerage estimates. Going forward, price trends in Europe and policy developments in the UK are likely to play a crucial role in shaping the stock's trajectory.
