Q The year gone by was very volatile with considerable macroeconomic challenges. How did Tata Steel navigate these challenges?

The global economy including the steel industry faced significant volatility in 2022 due to multiple issues including the Russia-Ukraine conflict-induced global energy crisis, supply chain tightness and inflationary pressures, semiconductor shortage related issues, subsequent interest rate hikes by central banks globally, and moderated economic activity in China due to its zero-Covid policy. All these together impacted the steel demand-supply balance and resulted in significant contraction in steel price to raw material spreads through the year. Indian Steel makers were further impacted by the introduction of a 15% export duty from May 2022 till November 2022 which created supply imbalance compared to historical trends.

In Tata Steel, we responded with agility and sharpened our focus on managing the volatility by raising the bar on managing risks arising from sharp changes in underlying trading conditions especially given our long supply chain. This was demonstrated in our management of working capital where we ended the financial year with a release of over ~₹5,500 crore of in the fourth quarter. Our continuous improvement programs Shikhar in India and similar other initiatives in Netherlands and UK focussed on bettering operating metrices so that the adverse impact of contraction in price spreads could to some extent be mitigated. We also continued to focus on cash flow optimisation and prioritised our capital investments accordingly.

Q The performance of Tata Steel appears modest compared to the previous financial year 2021-22. Can you please provide a perspective on the performance in FY2022-23?

In Financial Year 2021-22 underlying market fundamentals were favourably aligned across the industry and the benefit of the same was reflected in Tata Steel’s financial performance also. However, by historical standards FY2021-22 can’t be considered as a trend year in the true sense. In fact, our Consolidated EBITDA for the year was ₹32,698 crore and the Profit After Tax was ₹8,075 crore. In FY2022-23, Tata Steel on a consolidated basis reported its 2^nd highest ever EBITDA.

During the year, Tata Steel India’s operational performance witnessed many firsts and records including highest-ever crude steel production of 19.9 million tons, growing 4% on a Y-o-Y basis. India deliveries increased in line with production, surpassing the previous record. The Automotive sector saw a 5% Y-o-Y increase, Branded Products and Retail rose by 11% Y-o-Y, and Industrial products & projects were up by 14% Y-o-Y. The EBITDA for Tata Steel India stood at ₹27,561 crore, translating to an EBITDA per ton of ₹14,606, which is the third highest in the history of the Company and reflects the resilience of the India business inspite of a very volatile and challenging external environment. The Company's India crude steel production now accounts for two-thirds of its overall production and this trend is expected to continue as we focus on investments and growth in our home market where we enjoy a premium leadership position.

In our European business, Tata Steel recorded a revenue of £9,293 million and EBITDA was £477 million resulting in EBITDA per tonne of £58. The sharp reduction in steel prices in the second half of the year, high energy costs due to the conflict in Ukraine and above normal inflation impacted the financial performance for the year. The ongoing upgrade of Tata Steel Nederlands' Cold Mill in IJmuiden Plant had an adverse impact on the product mix as well.

During FY2022-23, we also undertook key strategic initiatives towards growth and long term value creation. In the first half of the year, Tata Steel Long Products Limited, completed the acquisition of Neelachal Ispat Nigam Limited (NINL) under the Government of India divestment program, at an aggregate consideration of approximately ₹12,100 crore. This acquisition is part of the master plan for our long products business and being part of the Kalinganar eco-system is well positioned to grow synergistically in the future. The acquisition was efficiently implemented and even though the NINL plant had been mothballed for nearly three years, within just nine months of this acquisition, we successfully ramped up the production run-rate to its rated capacity of ~1 million tonnes on an annualised basis.

Secondly, as part of our organic growth strategy, towards the end of the financial year, we commissioned the first circuit of the 6 MnTPA Pellet Plant and the Pickling Line and Tandem Cold Mill Line within the 2.2 MnTPA Cold Rolling Mill complex at our Kalinganagar plant.

As part of our strategy to invest in circularity and deploy capital towards low carbon steel making, Tata Steel also signed a Memorandum of Understanding (MoU) with the Government of Punjab to establish a state-of-the-art scrap utilising electric arc furnace (EAF) based long products steel plant in Ludhiana, with a capacity of 0.75 MnTPA. The plant is expected to be operational within two years and will produce construction-grade steel rebar under brand 'Tata Tiscon’.

Considering the year’s financial performance and based on the overall review of the business, the Board of Directors recommended a dividend of ₹3.60 per equity share of face value ₹1/- each.

Q The net debt of Tata Steel increased compared to FY2022-23, will the Company go back to the deleveraging journey?

On a steady state basis our deleveraging journey will continue and is an enterprise strategy which we remain committed to. To put this in perspective, in FY2022-23 we undertook the acquisition of NINL with outflow of ~₹10,000 crore and also the acquisition of a ferro alloys processing unit for ~₹1,000 crore during the year. In addition, we allocated sizeable capex on the ongoing 5 MnTPA brownfield expansion in Kalinganagar. Therefore, the capital allocation on growth was higher to help provide a step change in earnings and cash flows for the future. Apart from this, the year witnessed a significant contraction in steel price to raw material price spreads, as well as high levels of energy costs, which had an adverse impact on earnings and cash flow generation. We are committed to cash flow optimisation and in the last quarter of the financial year 2022-23, we were able to reduce debt by around ₹3,700 crore on the back of a special drive on working capital management.

Q The Board approved the amalgamation of seven subsidiaries and an associate company into Tata Steel. How does this move align with the Company's broader strategy and what is the expected timeline for its completion?

The proposed amalgamations are expected to enhance management efficiency, drive sharper strategic focus, and improve agility across businesses. They will also drive synergies through raw material security, centralised procurement, optimisation of inventories, reduced logistics costs, and better facility utilisation. Furthermore, it is expected to enable growth in value-added segments and reduce overhead and corporate costs.

Each of the amalgamations are expected to create value for all shareholders and also aligns with Tata Steel's long-term strategy to simplify the group holding structure.

The proposed amalgamations are currently going through judicial and regulatory process. We expect the process to complete by the end of this financial year.

Q Given the UK upstream and midstream assets are reaching end-of-life in the next 12 to 24 months, what is the strategy in relation to the future of the business outside of the discussions with the UK Government for transitioning to low carbon configuration?

Tata Steel has had active and detailed discussions with the UK Government in relation to the future of the UK business. Given the UK’s decarbonisation journey and rising carbon costs, it has been clear that for the continuity of steel making in the long-term, it is necessary for Port Talbot to transition to alternative green technologies. Tata Steel has therefore sought support from the government in two forms: (a) In policy terms by encouraging the transition to green steel and ensuring a cost competitive landscape, and (b) partnership in financing of the project given the size of investment and the financially constrained position of our UK business. These discussions are ongoing.

At the same time, some of the existing heavy end assets in Tata Steel UK will reach end of useful life over the following few years. The management of Tata Steel UK will evaluate all scenarios with regard to the future configuration of the business and will consult appropriately with various stakeholders prior to relevant strategic decisions being taken. Any decision making will also take into account our market, customers, supply chain impacts and safe operating practices for our employees.

Q How is Tata Steel furthering its commitment to decarbonisation and sustainable operations?

Tata Steel is committed to the Tata Group’s stated objective of achieving Net Zero emissions by 2045, as part of the group-wide Project Aalingana (embrace). Under this project the Tata Group is focused not just on the decarbonisation of businesses and value chains; but also applying a systemic, circular economy approach to reduce resource use and waste; and preserving and restoring the natural environment.

Tata Steel’s approach and pace of decarbonisation will be calibrated for each location based on the local regulatory framework, government support, and the willingness of customers to pay for higher-cost green steel.

The IJmuiden steelworks of Tata Steel Nederland already rank 3rd in the 2022 CO₂ intensity benchmark for Blast Furnace based steel producers, published by the World Steel Association. Even so, Tata Steel Nederland has a public commitment to reduce its CO₂ emissions by 5 Megatons by 2030. In July 2022, it entered an Expression of Principles with the Ministry of Infrastructure and Water Management, and the Ministry of Economic Affairs and Climate in the Netherlands. It is committed to transitioning in a phased manner out of blast furnace operations to steel making using Direct Reduced Iron technology and electric smelting, with an eventual transition to Green Hydrogen depending on availability and economics. It is currently engaged with multiple technology and engineering partners to complete detailed evaluation and engineering, implementation planning and costing of the project.

Tata Steel Nederland is also undertaking a comprehensive project to reduce dust and other fugitive emissions from its plant to make it future ready. It has committed to spend €300mn in Roadmap+ investments, including an ongoing de-NOx investment in the pellet plant (largest environment installation in a pellet plant in the world), covering bunkers and transport systems and installing dust screens, and upgraded coal filters. These projects are currently under implementation and part of the planned capital expenditure in the Company.

In Europe, we have also already launched low carbon steel products. Zeremis® Carbon Lite, launched in Tata Steel Nederland, is a steel with an allocated carbon footprint reduction of up to 100%. Several customers including Wuppermann, BILSTEIN, EMW Stahl Service, Arania, Permastore and Hardt Hyperloop have reached agreements to source this steel. In fact, underlining the demand for green steel in Europe, Tata Steel Nederland has already signed a memorandum of understanding with Ford to supply the carmaker with Zeremis green steel once the IJmuiden steelworks switches to green hydrogen-based steelmaking. We offer similar Carbon Lite solution from our UK operations under the brand name Optemis™ Carbon Lite.

In our India Steel operations, we adopt a two-pronged approach to decarbonisation, focussing on Carbon Direct Avoidance (CDA) and CO₂ Capture and Use. We have implemented several initiatives as test and incremental cases including conducting a trial of continuous Coal Bed Methane (CBM) injection, hydrogen injection in blast furnaces, operating a carbon capture and utilisation plant at pilot scale, and increasing scrap charge in our blast furnaces. As stated earlier, we are working to establish a
state-of-the-art scrap utilising electric arc furnace (EAF) based long products steel plant in Ludhiana, with a minimal carbon footprint and a capacity of 0.75 MnTPA.

Tata Steel in India is also deeply committed to reducing freshwater consumption, developing sustainable supply chains, and embracing circular economy principles. We are maximising effluent treatment and increasing the usage of treated water from sewage treatment plants in Jamshedpur and through storm water recovery at Kalinganagar. Tata Steel is also looking to both maximise the usage of scrap in our existing blast furnace based operations (in addition to setting up electric arc based facilities) as well as maximising solid waste utilisation within our own operations and through the sale of by-products. We have launched Tata Aggreto and Tata Nirman, India’s 1^st branded steel slag products. Furthermore, we remain dedicated to the United Nations Sustainable Development Goals (SDGs) with a particular focus on greenhouse gas (GHG) emissions, specific fresh-water consumption, and circular economy targets. We are also committed to enriching our portfolio of green products.

We are happy to share that in recognition of our efforts, Tata Steel has been recognised by worldsteel as a Sustainability Champion for the sixth consecutive time.

In Europe, we have launched Zeremis® Carbon Lite and Optemis™ Carbon Lite, low carbon steel products, having allocated carbon footprint reduction of up to 100%.

Q As the global reporting landscape shifts towards sustainability reporting, what actions is Tata Steel taking towards fulfilling this requirement?

Tata Steel has historically taken a leadership position in transparently and comprehensively reporting on its performance in relation to ESG (Environmental, Social, and Governance) parameters. In 2015-16, Tata Steel transitioned from compliance-based to governance-based reporting and published the country’s 1^st Integrated Report despite there being no statutory mandate and has continued on this journey of improvement of its disclosure standards each year. We believe that a sustainable finance framework, effective and transparent reporting, and comprehensive disclosures will not only aid our investors and stakeholders, but also help us to accelerate the transition to a more sustainable long-term future.

We are actively involved in aiding the growth of national and global disclosure standards and their subsequent adoption. We are active within the IFRS Foundation which is responsible for the development of disclosure standards through the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB). Tata Steel has adopted the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD), has undertaken independent assessment of its Physical and Transition Climate risks and published a Climate Change Report on a consolidated basis, aligned with the recommendations of TCFD, as part of Tata Steel’s Integrated Report for FY2022-23. We have taken the lead in the Indian Steel Industry for environmental certification of our products and published GreenPro certification for Steel Rebars (Tata Tiscon), Tubes (Tata Structura, Tata Pipes, Tata EzyFit), Steel Doors and Windows (Tata Pravesh) and Ground Granulated Blast Furnace Slag (Tata Aggreto). Tata Steel in Europe is also the first steel manufacturer to become an approved Environmental Product Declaration programme operator in Europe. Tata Steel also conducts Life Cycle Assessment for a range of products across multiple geographies, which aligns with Tata Steel's commitment to be a benchmark in sustainability disclosures and to provide customers with productspecific sustainability information.

We have also released our first Business Responsibility and Sustainability Report (BRSR) this year, on a consolidated basis, providing an in-depth analysis of our corporate social responsibility and sustainability initiatives, and an insightful overview of our efforts during the past year. We have also undertaken assurance for key ESG indicators for all major Tata Steel Group entities in India and Europe for the first time.

To ensure high quality learning experiences, we partnered with reputed content providers and introduced new learning platforms, enriching the upskilling journey for our employees. Our Industry-leading policies and concerted efforts earned us the “Great Place to Work” certification by the Great Place to Work® Institute for the sixth consecutive year. Our pioneering role in fostering an inclusive workplace that values human capital was recognised with the “GOLD” award for the second consecutive year by the India Workplace Equality Index (IWEI), 2022 and acknowledgement by the World Economic Forum as a Global Diversity, Equity & Inclusion Lighthouse.