Broker’s Call: Tata Steel (Hold)

Why It Matters

The results reveal margin pressure despite volume gains, shaping investor sentiment and valuation in a competitive global steel market.

Key Takeaways

• Revenue down 3% QoQ, volumes up 4%.
• EBITDA fell 11% to ₹8,200 crore.
• UK EBITDA loss widened; Netherlands EBITDA declined.
• Cost‑transformation saved ₹8.6 billion in 9MFY26.
• Hold rating, target ₹223, EV/EBITDA 7.5×.

Pulse Analysis

Tata Steel’s third‑quarter FY26 numbers illustrate the classic steel‑industry paradox: higher production volumes are being offset by softer pricing, leading to a 3% revenue dip and an 11% EBITDA contraction. The decline was most pronounced in its European operations, where the UK unit’s loss per tonne widened and the Netherlands plant saw EBITDA per tonne fall amid regulatory headwinds and subdued demand. These pressures underscore the sensitivity of steel margins to global commodity cycles and regional economic slowdowns.

Against this backdrop, the company’s cost‑transformation agenda has begun to bear fruit, delivering ₹8.6 billion in savings across the first nine months. The strategic acquisition of a controlling stake in Thani Pellets expands Tata’s downstream portfolio, integrating colour‑coded products that can command higher margins. Simultaneously, expansion plans on India’s east coast in Odisha aim to unlock up to 35 million tonnes of capacity, while a greenfield site in Maharashtra offers geographic diversification for western and southern markets. The imminent commissioning of the Ludhiana plant adds further volume flexibility, positioning the firm to capture domestic demand rebounds.

Analysts at IDBI Capital apply a 7.5× EV/EBITDA multiple to FY28E earnings, arriving at a ₹223 target price and reaffirming a Hold stance. This valuation reflects confidence in the anticipated Q4 EBITDA lift from volume growth and continued cost‑takeout, yet it remains cautious given lingering price weakness and European operational challenges. For investors, the key narrative is whether Tata Steel can translate its transformation and expansion initiatives into sustainable margin recovery as the global steel cycle stabilises.

Broker’s call: Tata Steel (Hold)

IDBI Capital · Published · February 9, 2026

Tata Steel’s Q3 FY26 performance was above our expectations. Revenue fell 3 % QoQ to ₹57,000 crore, driven by a 4 % QoQ increase in volumes, aided by strong growth in India operations.

This was offset by a 6 % QoQ decrease in realisations owing to weak steel prices. Consolidated EBITDA declined 11 % QoQ to ₹8,200 crore, with EBITDA/t declining 11 % QoQ to ₹9,987.

UK operations saw EBITDA loss widen to ₹14,199 /t in Q3 FY26 from ₹13,510 /t in Q2 FY26 owing to subdued demand and pricing. The Netherlands business posted EBITDA of ₹4,068 /t, down from ₹5,948 /t in Q2 FY26 amid pressure from regulatory burdens. The cost‑transformation program achieved ₹8,600 crore in cost saving during 9MFY26.

The company completed the acquisition of a 50.01 % stake in Thani Pellets and consolidated its colour‑coded business. Expansion strategy focuses on the East Coast (Odisha) with an opportunity to reach 35 million tons, while a greenfield site in Maharashtra offers optionality for western and southern markets. The Ludhiana plant is expected to commence operations by mid‑March. Management anticipates an EBITDA expansion in Q4 FY26 due to volume growth and cost‑takeout benefits, particularly in the Netherlands and India.

We roll over to FY28E estimate and assign an EV/EBITDA multiple of 7.5× to FY28E EBITDA to derive a target price of ₹223 and maintain a HOLD rating on the stock.