Tata Steel net profit rises 7x to ₹12,548 crore in Q2 FY22

Tata Steel, one of India's largest steelmakers, posted a massive rise in consolidated net profit at ₹12,548 crore in the second quarter, 7.5 times the ₹1,665 crore recorded in the same period last year. In the first quarter of this financial year, Tata Steel registered a profit of ₹9,768 crore.

The size of Tata Steel's profitability will be clear when compared with Reliance Industries at ₹13,680 crore in the second quarter. Reliance's profits are from three different businesses—refining and petrochemicals, telecom and retail. Another comparison is TCS, the second-largest company in India by market value. Tata Steel's profit is nearly ₹3,000 crore more than that of TCS (₹9,624 crore in Q2).

The steelmaker's consolidated turnover at ₹60,283 crore has risen steeply from ₹38,940 crore a year ago. In the first quarter, the company had posted turnover of ₹53,372 crore. The rise in revenue and profit are primarily because of high prices of steel. However, there have been concerted efforts from the Tata management to improve operational performance. The company has added greenfield capacities and acquired bankrupt firm Bhushan Steel and Usha Martin's steel businesses. The turnaround of the European business is another focus area of the management. They sold off underperforming NatSteel Singapore.

T V Narendran, chief executive officer and managing director, Tata Steel, said the company’s steel deliveries in India expanded 11% despite a contraction in market demand. “Our European operations have also delivered robust performance underpinned by strong improvement in realisations,” he said. Tata Steel Europe’s revenue increased 11% quarter-on-quarter and 50% year-on-year to £2,108 million in Q2. Earnings before interest, tax, depreciation and amortisation (EBITDA) improved 2.2 times to £328 million on a quarter-on-quarter basis, which translates to an EBITDA per tonne of £153.

According to Narendran, the company is watchful of elevated coal prices and high energy cost as key risks to margins going forward. The company spent ₹2,191 crore as capital expenditure during the second quarter, for the ongoing 5-MTPA expansion at Kalinganagar. While investing, it also reduced gross debt to ₹78,163 crore with repayments of ₹11,424 crore in the first six months of the current fiscal. Net debt declined to ₹68,860 crore.

The stock of Tata Steel was 0.11% up on Thursday and closed at ₹1,300. The share price increased 175% in the last year and its market value stood at ₹1.56 lakh crore. However, the value is far lower compared to biggies — Reliance at ₹17 lakh crore and TCS at ₹13 lakh crore — because of perception issues of investors. Avenue Supermarts, which runs DMart retail stores, has more than double market value (₹3.24 lakh crore) of Tata Steel, though the retailer generates much lower quarterly profit — ₹418 crore in Q2.