Tata Steel: The Bright Spot in Tata Group's 2025 Performance and Why Analysts Are Bullish for 2026

After a bruising 2025 that saw Tata Group stocks emerge as the weakest performers among large conglomerates, eroding about Rs 3.4 lakh crore in market value due to declines in names such as TCS, Trent, Tata Motors, and Indian Hotels, a few pockets of resilience still stood out. Tata Steel and FMCG arm Tata Consumer Products emerged as bright spots, ending the year as the group’s joint best-performing stocks with gains of 30.4% each.

To be sure, Tata Steel, one of India’s leading steel producers, added Rs 52,368 crore in market value during the year. However, market experts believe this may not be the end of the road. Backed by multiple growth triggers, they suggest there is still a comfortable upside left as investors step into the new year, and here’s why.

Operational resilience

Tata Steel’s asset profile continues to improve, with a rising contribution from its higher-margin India business. The share of India volumes has increased steadily from 33% in FY15 to 68% in FY25 and is expected to rise further to 72% by FY28E, supporting a structurally stronger earnings mix, international brokerage firm Jefferies said in a note. To be sure, analysts at the firm have raised the target to Rs 230 (Buy), an upside potential of 31% from current market levels.

The company’s recently commissioned 5 million tonne per annum capacity in India is ramping up and is expected to drive a healthy 6% CAGR in domestic steel volumes over FY25 to FY28E. Tata Steel is also setting up a 0.85 million tonne electric arc furnace, which is scheduled for commissioning in March 2026, and is evaluating another EAF. In addition, the company plans to commence a 5 million tonne per annum expansion at NINL in the coming months, further strengthening its India footprint.

Government support

India has imposed a three-year import tariff of between 11% and 12% on some steel products, according to a finance ministry order published on December 30, as the government aims to curb cheap shipments from China. The Indian government’s decision, experts say, provides stronger pricing protection for domestic manufacturers.

While steel prices have remained largely muted in the current calendar year, Welekar noted that India continues to stand out as a global bright spot for steel consumption. Domestic steel demand has been growing in the lower double digits, with consumption rising by around 8% in the first eight months of the current fiscal, significantly outperforming global peers, Aditya Welekar, AVP at Axis Securities, told ET NOW.

Management growth roadmap

In a recent analyst meet held last month, the company reaffirmed its long-term growth strategy for the India business and announced a series of capacity additions and strategic initiatives aimed at strengthening its product mix and expanding future growth visibility.

The board approved the long-awaited Phase 1 expansion of the NINL (Neelacal Ispat Nigam Ltd) long products facility, increasing capacity by 4.8 million tonnes per annum, from 1.1 million tonnes to 5.9 million tonnes per annum. “This expansion provides Tata Steel with long-term growth visibility in long products extending beyond 2030,” domestic brokerage firm Axis Securities, with a Buy call and a target of Rs 195, said. In addition, the company approved the installation of 2.5 million tonnes per annum Thin Slab Caster and Rolling facilities at Tata Steel Meramandal, which will further enhance finished steel capacity in flat products.

To strengthen its presence in the automotive segment and support import substitution, Tata Steel also approved the setting up of a 0.7 million tonnes per annum hot rolled pickling and galvanising line at its existing Cold Rolling Complex in Tarapur, Maharashtra. This facility is expected to improve the company’s value-added offerings in the automotive steel space.

Some overhangs

In Europe, Tata Steel’s Netherlands operations may see weaker profitability in the December quarter due to lower realisations, though the company expects a recovery from the March quarter, says Jefferies. However, UK operations remain challenging, with the earlier target of EBITDA breakeven by the March quarter now appearing difficult to achieve. EBITDA per tonne for Tata Steel Europe is factored at $3, $21 and $21 for the second half of FY26, FY27 and FY28E, respectively.

How are valuations looking?

Tata Steel’s net debt is expected to decline by 24% cumulatively over FY25 to FY28E to about Rs 62,800 crore, which is equivalent to around 9% of its market capitalisation. The improving balance sheet reflects expectations of stronger cash flows over the medium term.

The stock is currently trading at around 2 times FY27E price-to-book, for an expected return on equity of 13–18% over FY26–FY28E, compared with its long-term average valuation of 1.1 times book for 9% ROE. Jefferies values the India business at 8.5 times September 2027 EV/EBITDA while assigning zero enterprise value to Tata Steel Europe.

Reflecting expectations of higher steel prices in India, Jefferies has increased its EBITDA estimates for FY26–FY28E by 4–6% and EPS estimates by 9–11%, with its FY27–FY28E EPS now 6–15% above street expectations. After a muted 5% year-on-year growth in EBITDA in FY25, EBITDA is expected to grow sharply by 46% in FY26E, followed by 26% growth in FY27 and 5% in FY28E.

Tata Steel shares have risen for 6 straight sessions and have gained nearly 10% over the same period.