The debt-burdened Tata Steel has built up a liquidity war-chest of Rs 20,144 crore to scrape through the economic turbulence post the coronavirus pandemic. The liquidity buffer increased by 43.6 per cent in the six months (January-June) and it includes Rs 14,178 crore of cash and cash equivalents on its books in the June quarter. Koushik Chatterjee, Executive Director and CFO, said that the company will deploy this surplus liquidity to deleverage the balancesheet as the business conditions normalise.
At the end of December 2019, Tata Steel had Rs 14,027 crore liquidity, comprising of cash and cash equivalents of Rs 5,239 crore and undrawn bank lines of Rs 8,788 crore. The liquidity increased primarily because of the rise in cash portion. The liquidity stood at Rs 17,745 crore in March, including Rs 11,549 crore in cash and cash equivalents and Rs 6,196 crore of undrawn credit lines. The cash and cash equivalents portion increased by 120 per cent in January-March and 22.8 per cent in April-June.
Tata Steel, the leading steelmaker in India and Europe, has started stocking the liquidity to deal with financial emergencies like loan repayments and fixed costs. "The company will continue to focus on manage for free cash flows for the rest of the year with structural interventions on cost take out, working capital and lower capex as guided earlier," said Chatterjee.
Tata Steel posted 32.4 per cent dip in consolidated turnover to Rs 24,289 crore in the June ended quarter. It made an operational loss of Rs 4,609 crore, compared to a profit of Rs 695 crore in the same period last year. The company has faced a total comprehensive income loss of Rs 9,631 crore in the quarter.
TV Narendran, CEO & Managing Director said, the economic activity is gradually recovering. "In India, we have ramped-up our capacity utilisations to 90 per cent levels with total sales in June exceeding FY20 average monthly sales.... In Europe, spreads are at unsustainably low levels but are expected to improve going forward. We are also engaged with respective governments in UK and Netherlands for their support," he added.
Chatterjee said, Tata Steel remained focus on its cash flow management to generate a free cash flow quarter and maintained its net debt at the March 2020 level. Tata Steel had a net debt of Rs 1,04,779 crore in March.