Jan. 25 (Bloomberg) -- Tata Steel Ltd., India's biggest steelmaker, said second-quarter profit, including that of Corus Group Plc, was 33.08 billion rupees ($840 million). Shares rose.

Net income includes a one-time gain of 18.5 billion rupees from an increase in the value of bonds held by Corus, the Mumbai- based steelmaker said in an e-mailed statement yesterday. Sales in the quarter ended Sept. 30 was 324.25 billion rupees.

Corus raised prices in the three months ended September as demand for its products and raw material costs rose. Outside of China, the world's biggest steel user, demand has rebounded and is growing at 6.5 percent a year, driven by the Middle East, Africa and Russia, Credit Suisse Group said in a Jan. 14 report.

``Higher prices helped the company offset rising costs of raw materials,'' Rakesh Arora, an analyst at Macquarie Group Ltd. in Mumbai, said. ``In all likelihood, Tata may beat expectations at operating level by 7 percent'' in the year to March 31. Group operating profit in the second quarter was 25.96 billion rupees, beating Macquarie's forecast of 20.62 billion rupees.

Still, interest payments almost doubled in the quarter to 13.85 billion rupees because of loans to fund the $12.9 billion takeover of Corus, according to the statement. The increase is a ``surprise,'' analyst Bharath S, said.

``Higher interest cost implies that the company has taken a loan of about 600 billion rupees ($15 billion), compared with the expectation of 540 billion rupees,'' Bharath, who tracks metals at Sundaram BNP Paribas Mutual Fund in Chennai, India, said.

Tata Steel shares rose 6.4 percent to 714.45 rupees at close on the Bombay Stock Exchange, the most in three months. The stock declined 28 percent from Jan. 1 through yesterday amid a slump in equities worldwide.

This is the second time that Tata Steel has reported group profit since it bought the U.K. steelmaker in January last year. The company posted first-quarter profit of 63.38 billion rupees, which included a one-time gain of 41.21 billion rupees.

Tata Steel is scheduled to announce standalone earnings for the third quarter ended December on Jan. 31.

To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net.

Last Updated: January 25, 2008 05:27 EST