Jindal Stainless Loss Widens to Rs 257 Crore

An O P Jindal group company, Jindal Stainless has reported widened losses in its December 2012 quarterly results. Its loss for the third quarter of the current fiscal was at Rs 257 crore against a loss of Rs 110 crore reported a year earlier. Surprisingly, its sales grew by 36% to Rs 2784 crore.

India's largest and only fully integrated Stainless Steel manufacturer has reported losses in each of the first three quarters of the current fiscal. In FY12 too, it had reported loss.

The company, in its notes, has said that the results were impacted due to the subdued global economic condition and adverse exchange fluctuations. It also attributed the losses to its expansion of the Odisha stainless steel capacity. In the September 2012 quarter, the company had cited a surge in the flat prices as another reason for the subdued performance.

This quarter has seen power and fuel expenses rising by 39%. Other expenses also grew by 39%.  Due to higher input costs, its total expenses grew by 44%, which impacted margins by 579 basis points on a YoY basis to 4.67%. Sequentially too, its margins are down by 11 basis points. Its depreciation during the quarter was up over 55%, which also partially impacted its profitability.

Its interest expenses have more than doubled to Rs 262 crore from Rs 125 crore reported a year before. The higher interest payments were due to the rise in its debt. In the September 2012 quarter, the company’s balance sheet had reported a long-term debt of Rs 8303 crore and a short-term debt of Rs 1943 crore, both of which were increased from their values in March 2012.

Its debt to equity ratio also rose to 5.91x by September 2012, against 4.58x in March 2012. Debt service coverage ratio was at 0.1x and interest cover ratio was at 0.18x, indicating that the company has severe problems meeting its debt obligations. For the December 2012 quarter, the company has reported loss at the PBIT level, indicating that things have now worsened further in the quarter.

Its lenders have already approved a debt restructuring mechanism and a restructuring of USD 250 million is currently under process. How it unfolds remains to be seen.

Considering its financial performance, there is not much to talk about the company. The stock has shown a very poor performance on the bourses in 2012 and once again in the current year, indicating that there is hardly anything to be expected from the company. Investors, at the moment, should avoid the counter.