TATA Steel shares gains as Q1 net profit jumps over 126 per cent

Tata Steel an Indian multinational steel-making company, recently declared its June quarter consolidated results. The company posted a strong 126.18 per cent year on year growth in PAT, which stood at Rs 762.96 crore in Q1FY16 as compared to Rs 337.33 crore in Q1FY15. PAT growth mainly led by 252.63 per cent rise in company's other income and it reached to Rs 762.17 crore in Q1FY16 against Rs 216.14 crore reported a year ago. Also, its tax expenditure declined by 52.30 per cent from 1080.41 crore in Q1FY15 to Rs 515.37 crore in Q1FY16.

Tata Steel reported a 16.82 per cent decline in operating revenue, amounting to Rs 30300.33 crore in Q1FY16 as compared to Rs 36427.21 crore in Q1FY15. The company's Indian operations reported better underlying performance despite the continued onslaught of imports and the many challenges in the market place, due to strong focus on costs, customer value management and productivity improvements. In Europe too, the imports into UK from China has increased substantially thereby depressing the prices and impacting the Company's performance in this quarter.

Tata Steel continued its strategy of en-cashing non-core assets and has raised about Rs 1000 crores during the quarter by selling a part of its equity portfolio. There is a strong focus on cash flow management that has helped the Company maintain its underlying debt despite incurring more than Rs 3200 crores on capital expenditure during the quarter.

The Company's total operating expenditure also decreased by 14.39 per cent to Rs 27526.09 crore in Q1FY16 against Rs 32154.64 crore in Q1FY15. Tata Steels all expense heads declined sharply due to reduction in June quarter revenue, it contains majorly a 21 per cent year on year fall in consumption of raw-materials to Rs 8693.12 crore, a 31.16 per cent fall in purchase of traded goods to Rs 2842.38 crore and employee cost droped by 13.11 per cent to Rs 4895.75 crore compared to same period of last year.

The EBITDA shrank by 35.07 per cent on an annual basis to Rs 2774.24 crore in Q1FY16, however its EBITDA margin contracted by 257 basis points to 9.16 per cent as compared to the corresponding quarter of last year, led by the decreased top-line. But, its PBT is down by just 12.17 per cent from Rs 1423.58 crore in Q1FY15 to reach Rs 1250.31 crore in Q1FY16, led by increase in other income & exceptional item and fall in depreciation & interest cost.

Its other income during the quarter includes gains of Rs 696.79 crore from sale of quoted investments, exceptional item includes Rs 105.14 crore on sale of company's stake in TATA projects and Rs 52.64 crore profit from stake sale of two joint ventures in Europe. Depreciation expenses were down by 13.14 per cent to Rs 1346.5 crore and its interest cost decreased by 12.32 per cent to Rs 1098.03 crore compared to the same period of last financial year. While, its PAT margin after minority interest expanded by 159 basis points to reach 2.52 per cent on an annual basis due to reduction in Tax cost.

Tata Steel's shareholding pattern indicates that FII holdings contracted by 607 basis points to 12.36 per cent and DII holdings expanded by 425 basis points to 28.75 per cent during Q1FY16 as compared to the same period of last year.

In response to the strong results shares of the company surged more than 4 per cent and touched a day high of Rs 257.90 on Wednesday (12th August) in the BSE.