Tata Steel raced past analyst predictions to report on Thursday a 155 per cent

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growth in its standalone net profit to Rs 1,192 crore in the third quarter, as volumes and margins improved. This was the first increase in profit in the current financial year. The profit beat the Rs 980 crore median estimate of 20 analysts in a Bloomberg survey.

Tata Steel shares rose by 4.81 per cent to Rs 586 on the day when Sensex was marginally up by 0.10 per cent. Earnings per share for the third quarter more than doubled year on year to Rs 13.24 on a fully diluted basis.

H M Nerurkar, Tata Steel’s managing director & chief executive officer, told Financial Chronicle that the continuous efforts during the slowdown and cheaper coal price had yielded results. “Our product mix has improved, cold- rolled and galvanised steel are more in proportion Besides, we have branded products and customer relations in place,” he said.

The total income rose by 32.52 per cent year on year to Rs 6,375 crore. Rakesh Arora, an analyst with Macquarie, told Bloomberg, “Price improvements in the current quarter will help the company better earnings in the next quarter.” Arora out an ‘outperform’ rating on Tata Steel shares. “This year is likely to extend much of the improvement that began in 2009 in the metal industry. Current valuations are yet to reflect the impending surge in earnings and de-leveraging. Even with a contraction in the earning multiples, the stock has the potential to appreciate by up to 34 per cent. We initiate coverage on Tata Steel with an ‘add’, brokerage Avendus said in a recent research report.

“Since the Indian steel demand is growing at 6-7 per cent, the demand from the automotive and construction sectors will continue to fuel our growth in the coming quarters,” Nerurkar said.

The net realisation on steel, according to Nerurkar, was stable at Rs 29,000 a tonne. Raw material costs fell by 12 per cent to Rs 1,420 crore, while income from sources other than the main business increased to Rs 264 crore from Rs 11.72 crore a year ago.

Volume sales rose by 49 per cent to 1.6 million tones, aided by demand for construction and automobile-grade steel, the company had said early in January.

Nerurkar had earlier said that the benefit of lower raw material costs would reflect in the margins for the third and fourth quarters. The company had net cash and cash equivalents of $1 billion as on December 31.

However, in the first three quarters taken together, the company’s net profit declined by 22.92 per cent year on year to Rs 2,885 crore. The data do not include financial results from other Tata Steel companies such as Tata Steel Europe (Corus). The consolidated results would be declared in February, it said in a statement to the stock exchanges.

To meet growing demand in the automotive sector, the company signed a joint venture agreement with Nippon Steel of Japan to produce cold- rolled steel in Jamshedpur.

The two companies announced that they would spend $388 million on the joint venture to produce steel sheets for automobiles in India.

The venture, to be located in Tata Steel’s Jamshedpur complex, will start operations by March 2013 and have a production capacity of 6,00,000 tonnes a year. Tata Steel will own 51 per cent of the venture and Nippon Steel the rest.

Nippon said it would consider extending the partnership to producing galvanised steel sheets used in cars. JFE Holdings, Nippon Steel’s nearest rival in Japan, last month agreed to cooperate with India’s JSW Steel on auto steel production. Prior to that ArcelorMittal had announced it would buy a stake in Uttam Galva Steels, a galvanised steel and cold- rolled coil producer.