Essar Oil’s Q4FY13 Net At Rs 200 Crore, GRMs Double

Essar Oil has reported a good set of numbers for the fourth quarter of FY13. The company, during this quarter, has reported gross revenues of Rs 25,757 crore, up by 34% on a YoY basis. The fantastic topline growth also helped the company to report a net profit of Rs 200 crore. In the fourth quarter of FY12, it had reported a loss of Rs 608 crore and hence the net profit for the quarter indicates that the organisation has left the worst behind and is now moving towards a new phase of growth.

During the quarter, the company reported its gross refining margins (GRMSs) at USD 9.06/bbl against USD 4.6/bbl a year earlier. On a QoQ basis, there is a slight drop in the GRMs. In Q4FY13, its production at the Raniganj coal bed methane block was 60000 standard cubic meters per day (SCMD). Essar Oil has said that the block development plan is on a fast track and has drilled 150 wells so far.

As its GRMs have doubled, the EBITDA also has improved by 3.5x. The reason for its margins to have shown a fantastic improvement is the expansion and optimisation of the current projects. With a superior operational performance, the company has also exited its CDR in FY13. During the quarter, its interest expenses more than doubled to Rs 920 crore. The same will come down and improve its net profit margins as it is moving towards the low cost foreign currency debt which will also act as a hedge against crude oil prices.

Essar oil has commissioned a coal-based power plant in FY13 for which it is sourcing coal from Indonesia. The power generated will be used for captive use by the company. The management has said that captive power will save the costs for the company and will enhance its margins going ahead. The management sounded very optimistic on the retail business. They have said that after the government’s decision to sell diesel at a higher price to the bulk customers, the retail segment has seen a rise in the volumes as the bulk is moving towards the retail. The company has a good network of retail outlets in tier II and III cities and is in the process of expanding this network which will help it increase its business.

On the crude oil front, the company chairman said that the crude oil prices are mainly lower due to a rise in the supply as well as higher production in the USA. He however said that the prices are driven by the market. Overall, Essar Oil looks in a good shape and we expect a positive movement in its price.