Calcutta, July 30: Tata Steel has reported a 28.18 per cent jump in first-quarter profit, backed by a huge foreign exchange gain of Rs 553.02 crore made from the acquisition of Anglo-Dutch steelmaker Corus Group Plc.

The company beat expectations with Rs 1,221.11 crore profit after tax compared with Rs 953.41 profit reported in the same period last fiscal.

Sales went up by 7.6 per cent to Rs 4,197.58 crore in the first quarter compared with Rs 3,899.45 crore a year ago.

Operating profit also increased 7.45 per cent to Rs 1,699.17 crore compared with Rs 1,581.30 crore in the same period last year.

However, steel production for the quarter dropped to 1.06 million tonnes from 1.11mt a year ago. Sales also dropped to 1.04 mt from 1.11mt.

The spike in net profit was because of an exchange rate gain following the spurt in the rupee against the dollar and other currencies.

The Telegraph had first reported on July 20 that Tata Steel would post a substantial foreign exchange gain from the Corus acquisition.

Rupee appreciation has led to the Tatas paying less rupee to buy dollar vis-à-vis its $6.14- billion debt to finance the acquisition of Corus.

A close look at the first quarter result reveals a possible dip in net profit in the absence of a gain of Rs 348.44 crore from exceptional items that originated from forex exchange operations.

The company’s net profit grew by Rs 268.73 during April-June this year.

Rights issue

The Tata Steel board today decided to increase the contribution of Tata Steel and Tata Steel Asia Ltd from $6.7 billion to about $7.4 billion .

This increase will essentially be covered by increasing the amount of the rights issue of 2 per cent cumulative convertible preference shares from Rs 4,350 crore to about Rs 6,000 crore.

The company had indicated that the conversion price of cumulative convertible preference shares could be in the range of Rs 500-600 within 18-34 months from the date of allotment.

There was also a provision that the conversion could be done at higher price.

The issue will be made to existing shareholders on an ex-right basis.

The Tata Steel stock today closed at Rs 647.30, down Rs 4.30, or 0.66 per cent, on the BSE while the sensex rose by 26.34 point or 0.17 per cent.