Tax gains save the day for Tata Steel, logs in Rs 3,303 cr net

Despite a decline in revenue, which was hit by the falling prices and plunging demand, Tata Steel on Wednesday reported a 5.9 percent rise in consolidated net for the September quarter at Rs 3,302.31 crore, thanks to the new tax regime. Consolidated income dipped 15.7 percent to Rs 34,762.73 crore in the reporting quarter from Rs 41,257.66 crore a year ago due to lower realization from sales, roiled by falling prices on one hand and demand on the other.

"Despite the challenging environment in both the domestic as well as international markets, we managed to maintain volumes in segments like industrial products, branded products as well as retail," chief executive and managing director TV Narendran said. On the huge tax gains, which helped it remains in the green, chief financial officer Koushik Chatterjee explained that the company "had a favorable tax impact to the tune of Rs 4,233 crore, of which Rs 2,425 crore was from adopting the new lower corporate tax regime by the domestic units and another Rs 1,808 crore came in from recognition/reversal of deferred tax by the offshore subsidiaries." During the quarter, consolidated production stood at 6.95 million tonne and deliveries at 6.53 million tonnes. Of this, domestic production stood at 4.50 million tonnes, and deliveries at 4.13 million tonnes, contributing 63 percent of consolidated deliveries, Chatterjee said.

Narendran said the slump in the auto sector has impacted domestic sales, but to a large extent was offset by higher exports. The business environment across the geographies it operates remains challenging, weighing heavily on price which has fallen by over USD 100 per tonne during the quarter.

"We have worked closely with customers across segments to drive sales and maintain volumes. We are focused on attaining productivity improvements across our operations as well as the supply chain to reduce cost and protect the margins," Narendran said but added quickly that he expects demand to pick up from now on given the end of the monsoons and the onset of the festive season. On the overseas operations, he said, "Europe continues to weak, but we are working on a transformation plan to make it cash positive."" Domestic operations reported an adjusted pre-tax profit of Rs 3,817 crore, on a margin of 18.9 percent.

On the merger of Tata Steel BSL (formerly Bhushan Steel) with Tata Steel, Narendran said it is will be completed by March provided the regulatory approvals come in by then. The gross debt of the company stood at Rs 1,11,549 crore with net debt component being Rs 1,06,952 crore.

"During the quarter, we have tied up for USD 525 million in foreign currency loans which will help lengthen our debt maturity profile. Our liquidity position continues to be strong with a cash balance of Rs 4,596 crore and an unutilised credit line of Rs 7,262 crore," Chatterjee said. During the quarter, the company completed the sale of its two overseas arms--First Steel in Britain and Cogent Power in Canada--and also working on to close/sell Orb Electrical Steels in South Wales, Wolverhampton Engineering Steel in Britain and Degel Steel in Germany.

On October 4, Tata Steel's step-down subsidiary Natsteel Holdings had signed a pact to sell its 56.5 percent equity in Natsteel Vietnam to Thai Hung Trading Company. "We are working to complete the process in the current quarter subject to necessary approvals," Narendran said, adding they are also committed to divest its 70 percent stake in Tata Steel Thailand.

"Currently, Synergy Metals & Mining Fund is carrying out detailed due diligence for the mandatory takeover. We are in active conversation with Synergy to ink a definitive document at the earliest," Narendran said. The Tata Steel counter closed flat at Rs 404.35 but with a positive bias on the BSE, while the benchmark Sensex rallied 0.55 percent hitting a fresh life-time high.

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