India’s Tata Steel Limited will continue to reduce debt by $1 billion per year going forward but does not aim to reduce net debt to zero given its expansion plans, Tata Steel chairman N Chandrasekharan told shareholders on Wednesday, June 29.
Mr. Chandrasekharan said that the company will be spending an estimated $1.54 billion every year on capital expenditure and will spend on acquisitions as opportunity arises but the focus will be “India centric” and no capacity addition was planned overseas.
“The main thing is to have the right capital structure, and not blindly go for zero debt. Currently, our debt to equity ratio and the debt to EBITDA ratio are both less than one. The company has a capital structure which is very strong and taking to zero debt can make the company's capital structure inefficient,” Chandrasekaran said.
“The Russia situation has definitely increased the fight in the market and the steel price in Europe is quite strong. For that reason, the new contracts that the UK entity and Europe entity have entered into are quite attractive. The EBITDA and cash level performance of the Europe and UK entities is expected to be stronger this year than all the previous years,” he said.