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Tata Steel quarterly profit jumps 54% on India demand

Acquisition of Bhushan Steel also helps boost revenue

Tata steel seeks to stave off competition from larger rivals such as JSW Steel.   © Reuters

MUMBAI (NewsRise) -- Tata Steel reported a 54% jump in third-quarter profit as strong demand for the alloy in India helped offset the impact of falling global prices.

The profit growth comes as the Tata Group flagship shifts focus to the local market where increased government spending on infrastructure is driving demand. The Mumbai-based company has been acquiring smaller rivals in the domestic market to double its capacity in the next five years as it seeks to stave off competition from larger rivals such as JSW Steel.

In September, Moody's Investor Service predicted India's steel consumption to rise at least 5.5% to 6% every year. The rising demand is India also attracting new players. ArcelorMittal, the world's largest steelmaker is set to enter the market. The Luxembourg-based company is mired in a legal battle to take over Essar Steel through the latter's insolvency resolution proceedings.

Tata Steel's consolidated net profit for the quarter ended in December stood at 17.5 billion rupees ($246 million). On a standalone basis, the company's net income stood at 24.56 billion rupees, while analysts were expecting a net profit of 25.40 billion rupees, according to Refinitiv data.

Revenue grew 23% to 412.2 billion rupees, mainly helped by the 18% jump in India steel deliveries. Tata Steel's acquisition of Bhushan Steel also helped boost volumes. Last year, the company bought the distressed assets of Bhushan Steel in one of its largest acquisitions after the purchase of U.K.'s Corus Group more than a decade ago.

However, the company had to contend with weaker demand outside India. Last month, Tata Steel said its Europe deliveries declined 13% in the quarter due to operational issues and lower spreads.

A protracted trade war between the U.S. and China and weakening global economic growth have pushed down Asian steel prices by 15% since September, CLSA said.

Tata Steel said its debt declined by 90.83 billion rupees to 1.01 trillion rupees. The company's long-pending merger of Europe steel business with Germany's Thyssenkrupp is expected to bring down the obligations. But the deal, signed last year, has yet to get approval from the European Commission.

The second phase review of the joint venture is ongoing and "we are closely working with the European Commission to facilitate the same," said T. V. Narendran, chief executive and managing director of Tata Steel.

Tata Steel has also been selling off parts of its other businesses in a bid to trim its debt. Last month, it sold its Southeast Asia business to China's HBIS group in a deal that will help the company pare down the debt by $500 million.

Ahead of the earnings, shares of Tata Steel closed 3.7% lower in Mumbai trading, while the benchmark S&P BSE Sensex lost 1.2%.

--Dhanya Ann Thoppil

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