Tata Sponge Slumps Despite Big Jump In Q4 Profit


Tata Sponge Iron shares slumped as much as 6 per cent on Tuesday at day’s low of Rs 539, despite the company posting a 49 per cent rise net profit in the March quarter on a year-on-year basis.Tata Sponge Iron, a subsidiary of Tata Steel, posted a net profit of Rs 12.81 crore against a net profit of Rs 8.57 crore a year ago.

Some traders attributed the fall in stock prices to profit-taking. The stock had run up significantly over the past one month, tracking the rally in metal shares. Tata Sponge Iron shares had gained16 per cent during the period as compared to a 2 per cent advance in Nifty.

However, the net income of the sponge iron manufacturer declined 12 per cent to Rs 140.39 crore as compared to the same quarter a year ago.The government’s action of putting a minimum import price on steel has helped the net realisations to go up in Q4,” said DP Deshpande, MD of Tata Sponge .

The stock market reaction was in contrast with what some of the analysts had expected.”Results are great, we expected the stock to open 5-10 per cent higher,” said G Chokkalingam, founder of Equinomics Research & Advisory.

“The small players have exited the industry because of their size and unviability due to the fall in the prices, which is a big positive for the company. Plus, the company has a lot of cash on the books. It’s (Tata Sponge Iron) a good bet for 1-2 years at current prices,” he added.As on 11.47 a.m., shares of Tata Sponge Iron were trading 3.16 per cent lower at Rs 552 underperforming the broad market indicator, Sensex, which was trading flat.

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