Tata Steel is on a path to completely eliminate its overseas debt within the next two years, according to a company spokesperson. This strategy emphasizes deleveraging while pursuing controlled growth.
As of FY26, the company’s overseas debt represented 18% of its total debt, amounting to ₹16,629 crore, which includes both term debt and working capital. Over the past five years, Tata Steel has significantly reduced its foreign currency borrowings, decreasing from around 50% in FY21 to the current 18%.
Debt Repayment Strategy
The overseas bonds, held by the subsidiary Abja Investment Company, are set to mature in January 2028. Tata Steel has no plans to refinance this debt, opting instead to repay it at maturity. Following this repayment, only working capital facilities related to international operations will remain.
Most of the debt incurred for the acquisition of Corus Plc has already been repaid, with the remaining debt primarily related to business investments rather than acquisitions.
Focus on Financial Health
Despite a rise in net debt from ₹51,049 crore in FY22 to ₹82,579 crore in FY25 due to expansion efforts, Tata Steel has reversed this trend, reducing net debt to ₹80,144 crore in FY26. The company's net debt-to-Ebitda ratio improved to 2.3x in FY26, indicating a stronger leverage position.
The company’s executives noted that the strategy to onshore overseas debt has helped mitigate risks associated with rupee depreciation, thereby enhancing financial stability.
Measured Growth Approach
Analysts believe that Tata Steel's debt levels will remain manageable even as it continues to invest in growth. The company is focusing on expanding its portfolio of value-added products rather than pursuing aggressive capacity increases like some competitors.
However, this conservative approach may impact market share growth, with analysts suggesting limited production increases post-FY27 due to slower capacity additions.
Capacity Expansion Potential
Tata Steel maintains significant flexibility to expand its upstream steelmaking capacity, with existing facilities capable of increasing output to 45-50 million tonnes. A proposed project in Maharashtra could add an additional 6-10 million tonnes.
While expansion options exist, the company emphasizes that growth rates will depend on market conditions and financial health. The focus remains on capturing market share in high-margin segments rather than merely increasing volume.
For FY27, Tata Steel plans to allocate approximately ₹20,000 crore for capital expenditures, with a significant portion directed towards domestic operations, including the expansion of Neelachal Ispat Nigam Ltd. and other downstream facilities.
