Tata Steel Ltd (TISC.NS) posted a 69 percent drop in quarterly profit as a raw material shortage curtailed domestic production and a flood of cheap imports hurt profitability in its European and Indian operations.

A slowdown in China and a devaluation of the Russian rouble have led to a surge in cheaper steel products entering international markets, pressuring steel prices and squeezing Tata's margins in Europe, its biggest market, and India.

Consolidated net profit fell to 1.57 billion rupees ($25 million) in the three months through Dec. 31, the lowest since the second quarter of 2013, from 5.03 billion a year earlier, the Mumbai-based company said in a statement on Friday.

"European steel demand continued to recover in 2014 and should improve modestly again this year," Karl-Ulrich Köhler, Tata Steel Europe's chief executive, said in a statement.

However, he added margins would remain under pressure due to rising imports.

Lower steel prices also led to an 8.5 percent drop in consolidated net sales to 333.24 billion rupees.

Tata Steel Europe, the continent's second-largest steelmaker by sales after ArcelorMittal (ISPA.AS), is looking to sell some loss-making operations and is shifting to higher-margin speciality steel to propel a turnaround, more than seven years after it entered the continent through the $13 billion acquisition of Corus.

It said due diligence was continuing on the potential sale of its long-products business in Europe to Klesch Group.

A string of mining stoppages in recent months led to a number of Tata Steel's iron ore mines in India being shut during the quarter, causing its plants to operate below capacity.

The company, which mines its own iron ore, was forced this year to buy in the raw material for the first time in more than a century of existence.

Shares in Tata Steel, part of the $100 billion Tata conglomerate, have lost more than a fifth of their value in the past three months. They closed down 2.7 percent ahead of the results in a Mumbai market that ended down 0.5 percent.

December-quarter profit at most steelmakers in India have been hit by a surge of cheaper imports, mostly from China, causing companies like JSW Steel Ltd (JSTL.NS) to urge the government to take action.