Tata Steel [Get Quote] second-quarter profit rose more than 50 per cent, even as the world's sixth largest steel maker, said prices will fall by 10 per cent this quarter as slowing economic growth and credit crunch force automakers and builders to cut orders. 

Profit in the three months ended September 30, excluding unit Corus, rose to Rs 1,787.81 crore (Rs 17.87 billion) from from Rs 1,190.83 crore (Rs 11.9 billion).

Prices per tonne of steel may fall by as much as Rs 4,000 by December, said Koushik Chatterjee, chief financial officer. Demand from makers of trucks and buses have fallen, while supplies to cars and other light vehicle have remained flat, he said.

Tata Steel shares fell 14 per cent to Rs 178 at close of trading on the Bombay Stock Exchange. The stock has dropped 81 per cent this year, compared with a 57 per cent decline in the benchmark Sensitive Index.

Rival Posco has dropped 56 per cent in the period, Nippon Steel  60 per cent and JFE Holdings 64 per cent.

The company's second-quarter sales rose 43 per cent to Rs 6,744.16 crore, as it increased prices of higher-grade products like hot rolled, cold rolled, galvanized coils and sheets. Raw material costs surged 73 per cent to Rs 1,381.76 crore.

"The expenditure of the company has been higher during the quarter because of raw material prices. From July 2008, the company entered into new contracts for coking coal, resultantly the increased costs reflected in September ending quarter," said  Chatterjee.

Tata Steel reported a foreign-exchange loss of Rs 345 crore (Rs 3.45 billion), compared with a gain of Rs 61 crore (Rs 610 million), after a slide in the Indian currency against the dollar in the quarter forced the company to revalue its overseas debt.

The company's interest charges rose 34 per cent in the quarter. Tata Steel paid for 10 per cent of loans in Corus books.

There won't be any short-term or medium-term payments till December 2009, the company said. "Corus had a term debt of 3 billion pounds. We have prepaid 10 per cent of the loans that is 300 million pounds," Chatterjee said.

The company's pension fund at June-end was 690 million pounds. By September end it went up by 100 million pounds, he said. Now the pension fund stands at 790 million pounds.

The company has a cash of Rs 1,500 crore (Rs 15 billion) to meet any liquidity requirements for the short term. It is meeting its capital expenditure through internal accruals, Chatterjee said.