Cairn India's Net Up By 17%

Vedanta group company Cairn India has reported revenue growth of 19.5% in its March 2013 quarter results, which turn out to stand below market expectations. Its total revenues grew from Rs 3651 crore to Rs 4363 crore. Net profit grew at a slower pace too i.e. by 17%, from Rs 2186 crore to Rs 2563 crore. The street had expected net profit of over Rs 2700 crore and hence the stock will remain volatile as far as the results are concerned.

On the EBITDA front, the margins have fallen sharply from 80% to 66%, owing to increased exploration costs. During the quarter, the company has started a fresh drilling program in its Rajasthan oil blocks and the exploration costs have grown sharply from Rs 64 crore a year earlier to Rs 365 crore this year, which translates into a jump of more than 463%. Besides, expenses in the gas blocks have also shot up by 51% to Rs 300 crore. During the quarter, cess too has increased by 73% to Rs 687 crore, increasing its overall operating costs. Together these 3 items form 91% of its operating costs which have more than doubled on a YoY basis. The impact is seen on the EBITDA margins which have declined sharply to 66.29%.

The company has seen its other income increased by 140% from Rs 92 crore to Rs 222 crore. Thanks to the rupee appreciation, there is some respite on the forex transactions as the company has seen minuscule forex loss of Rs 2.7 crore against a forex loss of Rs 216 crore a year earlier. Besides, the finance cost has also halved from Rs 30 crore a year ago to Rs 15 crore. During the quarter, the company has seen 67% decline in its taxes to Rs 58 crore.

Business Update

On the business front, the management has said that the company’s operating environment has significantly eased with an improved production in the Mangala field. The company was also able to bring Aishwariya field in production and has commenced gas sales from there. 

It has also initiated its largest exploration and appraisal program in the Rajasthan block and has lined a capex of USD 3 billion (about Rs 16200 crore). The exploration program will bring next level growth of the company as it has already found oil in the first well which it drilled.

In a key update, the company has said that the Rajasthan block currently produces 175,000 barrels of oil per day (bopd) and it expects oil production to increase to about 200,000-215,000 bopd in the current fiscal over increased production in the Mangala and Aishwariya fields. 

Though the Q4 results were somewhat below market expectations, the company has ended FY13 on a very strong note with 48% rise in revenues and 52% growth in net profit. The company also has seen 19% growth in its net production. The realisations however remained below that in the last year.

Cairn India has also announced a dividend of Rs 6.5 per share in the quarter, making a total dividend of Rs 11.5 for the year, giving a dividend yield of 3.9% on the CMP of Rs 293. The shares are expected to show some volatility over the results but long-term investors have no reason to worry as the shares will do well in FY14.