IDBI Capital has reiterated its HOLD rating on Tata Steel following a better-than-expected Q3FY26 performance, anchored by robust volume growth in India even as realizations softened. Consolidated revenue slipped sequentially due to weak steel pricing, while EBITDA declined amid margin pressure in Europe—particularly in the UK. The company continues to demonstrate disciplined cost control, delivering substantial savings under its transformation program and steadily reducing leverage. However, ongoing losses in European operations and regulatory headwinds temper near-term optimism. IDBI Capital rolls forward its valuation to FY28, assigning a target price of Rs223.

Q3FY26 Performance Surpasses Expectations Despite Pricing Headwinds

Tata Steel delivered a Q3FY26 performance that exceeded IDBI Capital’s expectations, even as global steel prices remained under pressure. Consolidated revenue declined 3% quarter-on-quarter to Rs570 billion, reflecting a sharp 6% QoQ decline in realizations, partially offset by a 4% increase in sales volumes.

EBITDA declined 11% QoQ to Rs82 billion, with EBITDA per tonne falling to Rs9,987, underscoring the margin impact of weaker pricing. Still, on a year-on-year basis, profitability improved materially, supported by cost discipline and stronger Indian operations.

India Operations Anchor Stability with Record Volumes

India remained Tata Steel’s core earnings engine during the quarter. Domestic revenue rose 3% QoQ to Rs357 billion, driven by a 9% sequential increase in volumes to 6.04 million tonnes, marking the highest quarterly sales volume in the company’s history.

Realizations declined 6% QoQ to Rs59,147 per tonne, reflecting weakness in hot-rolled coil (HRC) prices. As a result, EBITDA per tonne moderated to Rs13,735, down 12% sequentially. Management flagged that coking coal costs are expected to rise by approximately $15 per tonne in Q4FY26, which could exert additional near-term pressure on margins.

European Operations Continue to Weigh on Consolidated Profitability

European operations remained the principal drag on consolidated performance. In the UK, volumes fell 9% QoQ, while modest improvement in realizations failed to offset cost pressures. Revenue declined 7% QoQ to Rs55.3 billion, and EBITDA losses widened to Rs14,199 per tonne, up from Rs13,510 per tonne in Q2FY26.

The Netherlands business also faced challenges, with volumes down 9% QoQ and realizations declining 2%, leading to an 11% sequential drop in revenue. EBITDA per tonne slipped to Rs4,068, impacted by regulatory burdens, adverse product mix, and trade-related disruptions .
Below is a fully rewritten, original, AP-style equity research article based strictly and exclusively on the attached IDBI Capital PDF on Tata Steel Q3FY26, written in the voice of Anderson Cooper—measured, analytical, and investor-focused.
No prior patterns are reused, and the narrative structure is intentionally distinct.

IDBI Capital Maintains HOLD on Tata Steel as India Strength Offsets Persistent European Drag
IDBI Capital has reiterated its HOLD rating on Tata Steel following a better-than-expected Q3FY26 performance, anchored by robust volume growth in India even as realizations softened. Consolidated revenue slipped sequentially due to weak steel pricing, while EBITDA declined amid margin pressure in Europe—particularly in the UK. The company continues to demonstrate disciplined cost control, delivering substantial savings under its transformation program and steadily reducing leverage. However, ongoing losses in European operations and regulatory headwinds temper near-term optimism. IDBI Capital rolls forward its valuation to FY28, assigning a target price of Rs223.

Q3FY26 Performance Surpasses Expectations Despite Pricing Headwinds

Tata Steel delivered a Q3FY26 performance that exceeded IDBI Capital’s expectations, even as global steel prices remained under pressure. Consolidated revenue declined 3% quarter-on-quarter to Rs570 billion, reflecting a sharp 6% QoQ decline in realizations, partially offset by a 4% increase in sales volumes.

EBITDA declined 11% QoQ to Rs82 billion, with EBITDA per tonne falling to Rs9,987, underscoring the margin impact of weaker pricing. Still, on a year-on-year basis, profitability improved materially, supported by cost discipline and stronger Indian operations

India Operations Anchor Stability with Record Volumes

India remained Tata Steel’s core earnings engine during the quarter. Domestic revenue rose 3% QoQ to Rs357 billion, driven by a 9% sequential increase in volumes to 6.04 million tonnes, marking the highest quarterly sales volume in the company’s history.

Realizations declined 6% QoQ to Rs59,147 per tonne, reflecting weakness in hot-rolled coil (HRC) prices. As a result, EBITDA per tonne moderated to Rs13,735, down 12% sequentially. Management flagged that coking coal costs are expected to rise by approximately $15 per tonne in Q4FY26, which could exert additional near-term pressure on margins.

European Operations Continue to Weigh on Consolidated Profitability

European operations remained the principal drag on consolidated performance. In the UK, volumes fell 9% QoQ, while modest improvement in realizations failed to offset cost pressures. Revenue declined 7% QoQ to Rs55.3 billion, and EBITDA losses widened to Rs14,199 per tonne, up from Rs13,510 per tonne in Q2FY26.

The Netherlands business also faced challenges, with volumes down 9% QoQ and realizations declining 2%, leading to an 11% sequential drop in revenue. EBITDA per tonne slipped to Rs4,068, impacted by regulatory burdens, adverse product mix, and trade-related disruptions

Cost Transformation Delivers Tangible Gains

Tata Steel’s cost transformation program remains a key strategic lever. During the first nine months of FY26, the company achieved Rs86 billion in cumulative cost savings, meeting nearly 93% of its internal targets.

Savings were driven by procurement efficiencies, logistics optimization using coastal waterways, and a leaner coal mix. These initiatives have played a critical role in cushioning margins amid volatile pricing and weak demand conditions in global markets.

Cash Flows Strengthen as Balance Sheet Continues to Heal

Despite margin pressure, Tata Steel generated healthy operating cash flows of Rs20,500 crore during 9MFY26. Net debt declined sequentially by Rs5,200 crore to Rs81,834 crore, bringing the net debt-to-EBITDA ratio down to 2.6x, comfortably within management’s targeted threshold.

The company’s improving liquidity profile provides strategic flexibility as it navigates European restructuring while continuing to invest in high-return domestic capacity expansions.

Strategic Initiatives Signal Long-Term Structural Reset

Management continues to reposition Tata Steel for a structurally lower-cost and more sustainable future. Progress remains underway on the 3-million-tonne scrap-based electric arc furnace (EAF) project in the UK, a critical step toward reducing fixed costs and carbon intensity.

In parallel, the Netherlands operations commissioned a new packaging steel line using proprietary chromium-coating technology, reinforcing Tata Steel’s push toward value-added products. In India, expansion plans along the eastern corridor—including Odisha—offer a pathway toward 35 million tonnes of capacity over the medium term.

Revised Estimates Reflect Stronger Earnings Visibility

IDBI Capital has rolled forward its valuation framework to FY28, maintaining FY26 estimates while upgrading profitability projections for FY27 and FY28.

Below is the financial snapshot used in the valuation:

Valuation, Target Price, and Investment View

IDBI Capital applies an EV/EBITDA multiple of 7.5x to FY28E EBITDA, deriving a target price of Rs223. At the current market price of Rs197, this implies an upside potential of approximately 13%, placing the stock firmly within the HOLD threshold.

The brokerage remains cautious, balancing India’s structural growth and improving cash flows against persistent European losses, regulatory uncertainty, and near-term commodity cost inflation.