Tata Steel Ltd. announced plans to invest 338.7 billion rupees ($3.5 billion) to expand a mill in eastern India even as first-quarter profit missed estimate.

The steelmaker’s net income for the three months through June climbed 11% to 23.2 billion rupees ($242 million), from 20.2 billion a year earlier, according to a filing to the exchanges. That was below the 27.6 billion rupees average of analyst estimates compiled by Bloomberg, as higher raw material costs and losses at UK operations offset strong demand and firmer prices in India.

Total revenue rose 14% from a year earlier to 607.9 billion rupees, with sales at its India operations rising 19% to 369 billion rupees. Total expenses in the quarter were 13% higher at 569.4 billion rupees. Raw material costs increased 12% to 202 billion rupees.

“Global operating environment remained complex, with the impact of developments in Middle East on supply chains and input costs being more pronounced in the quarter,” chief executive officer T.V. Narendran said. “Our overseas operations also had to navigate operational disruptions.”

Steel producers in India have benefited from strong domestic demand, fueled by government spending on infrastructure and growing consumption from the automotive, real estate and defense sectors. A three-year extension of import tariffs, in December, added to the tailwind by supporting local steel prices, which helped offset rising raw material costs.

The company’s board approved a plan to add 4.8 million tons annual steelmaking capacity at unit Neelachal Ispat Nigam’s Kalinganagar factory in Odisha state. Tata Steel acquired Neelachal Ispat in 2022 and the process to merge it with the parent is ongoing.

The expansion is central to the company’s strategy of deepening presence in high-margin and branded long products, Narendran said.

Tata Steel’s operating profit — or earnings before interest, taxes, depreciation, and amortization — at domestic operations surged 21.6% to 191.6 billion rupees. Ebitda at the Netherlands unit plunged by 94% while the UK business continued to report operating loss.

Tata Steel’s Indian mills produced 11% more of the alloy in the first quarter. Quarterly production and deliveries were affected by maintenance shutdowns at Meramandali and Kalinganagar plants in India, the company said, adding that operations are expected to normalize in the coming quarters.

(By Preeti Soni)