Essar Oil

Essar Oil hit the roof on the back of its lower losses (YoY) in Q1FY14 despite having turned around in Q4. The market looked at the fact that it was the rupee which had played truant and pushed the company into the red. The 10% rupee depreciation during the quarter meant the company ended the quarter with a net loss at Rs.863 crore, 43% lower than Rs.1518 crore loss in Q1FY13. In Q4, the company had reported a net profit at Rs.200 crore. The company had a forex variation of around Rs 913 crore and of this, Rs.700 crore is MTM provision, which the company hopes to realize in the next quarter. The company posted a 12% (YoY) rise in net revenue at Rs.24,721 crore. Domestic sales contribution stands at 70%. The refinery processed 15% (YoY) more in current Q1, operating at 103% of its capacity.

The market is enthused by the fact that its GRM for the quarter came in at US$ 7/barrel v/s $4.69/barrel on YoY and this GRM is better than the international energy agency (IEA) benchmark based on oil methodology. It hopes to maintain at these levels for the current fiscal.  

The big worry is the huge debt. The company is planning to convert rupee loans to the tune of US$3.9 billion into dollar loans. Till date, it has managed to convert around US$800 million plus. At the end of FY13, the debt (long term borrowngs + short term borrowings) stood at Rs.22,400 crore. Its interest outgo for current Q1 stood at Rs 946 crore, up from Rs.920 crore in Q4 and Rs.884 crore in Q1FY13. The company has 1400 retail outlets and is working on adding 200 more. 35 of its fuel outlets offer multi fuel option.