Tata Steel’s Profit Jumps Fourfold As Company Eyes Stressed Assets

Tata Steel Ltd.’s net profit rose fourfold in the quarter ended December even as the company looks to acquire distressed assets and double production capacity.

Net profit rose to Rs 1,294 crore from Rs 294 crore in the same quarter last year, Tata Steel said in an exchange filing today. This was slightly lower than the Bloomberg consensus estimate of Rs 1,401 crore. The surge in bottom line came on a lower base after the steelmaker sold its unprofitable assets in the U.K. and agreed to merge its European operations with Thyssenkrupp AG in the same quarter last year.

The profit boost comes at a time when the company is looking to buy distressed steel assets undergoing resolution under the country’s new bankruptcy law and plans to double production capacity from the current 13 million tonnes.

Tata Steel is competing with Anil Agarwal’s Vedanta Ltd. for Electrosteel Steels Ltd., is looking to increase its bid for the bankrupt steelmaker, three people in the know told BloombergQuint requesting anonymity. It also submitted bids for Bhushan Steel Ltd. and Bhushan Power and Steel Ltd.

• Revenue rose 20.8 percent on a yearly basis to Rs 33,447 crore. This was higher than the Bloomberg consensus estimate of Rs 32,527 crore.
• Earnings before interest, tax, depreciation and amortisation rose 56.7 percent to Rs 5,697 crore in line with estimates.
• Operating margin expanded to 17 percent from 13.1 percent in the same quarter last year.

The company's Kalinganagar plant, which was commissioned in 2016 shut down its blast furnace for unplanned significant repairs following a sudden failure in auxiliary equipment, according to the exchange filing. Tata Steel expects to restart the blast furnace in the next 7-10 days, it added.

Ahead of the earnings announcement, Tata Steel extended gains for the second straight trading session and closed 2.1 percent higher at Rs 685.30 apiece. The stock is 11 percent below the Bloomberg consensus one-year price target. It returned 12.2 percent during October-December period, compared to 8.9 percent decline in benchmark Sensex.