Mumbai: Tata Steel Ltd, India’s second largest private steelmaker by capacity, reported Friday a 54% rise in net profit in the December quarter (Q3) from the year-ago period, aided by higher sales volumes and a 24% increase in sales to the lucrative automotive sector. Tata Steel's Q3 net profit stood at ₹1,753 crore compared with ₹1,136 crore a year ago.
Over the same period, production rose 11% to 7.23 million tonnes (mt), of which 4.38 mt was produced in India, backed by its recent acquisition of insolvent Bhushan Steel Ltd (now Tata Steel BSL Ltd). Sales in India stood at 3.89mt, accounting for more than 55% of consolidated volumes, the company said.
Consolidated revenue rose to ₹41,220 crore in the period while earnings before interest, taxes, depreciation and amortisation (ebitda) increased 27.4% to ₹7,225 crore.
For Tata Steel BSL, the integration is progressing smoothly, the company said, and the focus continues to be on ramping up production and realizing synergies. Tata Steel BSL's ebitda for the quarter was ₹1,008 crore and the Ebitda margin was 20.6%.
Tata Steel’s ongoing brownfield expansion at Kalinganagar in Odisha is on schedule and work has started on the cold rolling complex, “which will help in enriching our product mix and optimizing cashflows", the company said.
During Q3, Tata Steel and Germany's Thyssenkrupp AG “worked together to secure the required regulatory approvals for the proposed 50:50 joint venture in Europe. The European Commission Phase II merger control review is currently underway".
The acquisition process of Usha Martin’s steel business is being carried out through Tata Sponge Iron Ltd, a subsidiary of Tata Steel, and will be completed by Q4FY19.
Last month, Tata Steel announced that it had agreed to sell 70% stake of its South-East Asian operating entities for $327 million to China’s state-owned HBIS Group. The transaction is expected to be completed in Q1FY20, and the proceeds will be used for deleveraging. Upon completion of the transaction, Tata Steel's consolidated gross debt will come down by around $500 million.
Tata Steel divested its remaining 26.62% equity stake in TRL Krosaki, for ₹305 crore in the third quarter. The divestment is in line with stated strategic priorities of divestment of non-core assets and the proceeds will be used for deleveraging.
“The market environment for the industry was challenging during the quarter with softening of steel prices…The short-term finance taken for Tata Steel BSL acquisition has been refinanced with long-term loans of ₹15,500 crore," said Koushik Chatterjee, executive director and chief financial officer (CFO) of Tata Steel, said in a press note.
"During Q3, Tata Steel Group generated operating cash flows of ₹4,150 crore. The liquidity position of the group remains strong at ₹19,320 crore. Our consolidated gross debt has declined by ₹9,083 crore during the quarter including deleveraging of over ₹6,000 crore. We have repaid ₹3,000 crore from Tata Steel BSL since the acquisition as part of the overall deleveraging," Chatterjee added.