Tata Steel Q1 net jumps three-fold, warns of margin pressure

Tata Steel (TSL) posted an almost three-fold jump in its consolidated net profit at Rs5,347 crore in the fiscal first quarter, boosted by gains from selling its stakes in Australian mining firm Riversdale and Tata Refractories.

TSL's three-fold jump in its consolidated net profit was aided by stronger volumes at its Indian operations, better prices in Europe and a one-time gain from a stake sale.

Tata Steel's underlying net profit works out to Rs2,470 crore, which excludes the one-time profit of Rs2,880 crore on account of its stake sale in Australian coal miner Riversdale, compared to Rs1,825 crore a year ago, the company said in a filing with the Bombay Stock Exchange.

TCL realised Rs 4,942 crore by selling its entire 26.27 per cent stake in the Riversdale to Rio Tinto during the April-June quarter, the company said (See: Tata Steel exits Riversdale with A$1 billion stake sale). TSL sold its entire stake for $1.1 billion in at double its value in less than four years. However, TSL continues to hold a 35-per cent stake in Riversdale Energy (Mauritius) Limited, a project company currently developing the Benga coal tenement in Mozambique.

In May, TSL divested 51-per cent of its 77.46 per cent stake in group company Tata Refractories to Japanese firm Krosaki Harima, an associate firm of Nippon Steel of Japan; after the Japanese firm agreed to be a strategic partner. The deal was valued at Rs 576 crore, going by the Tata Refractories's (TRL) valuation at Rs1,130 crore (See: Tata Steel sells 51 pct in refractory unit to Japan's Krosaki for Rs576 crore).

In addition, TSL received Rs598 crore as compensation from buyers that walked out of a 10-year contract at Teesside Cast Products business (TCP). TSL (UK) had received a partial final award in its favour in an arbitration proceeding against TCP in January this year  and completed the full and final settlement of claims in June this year.