Lower production from its KG-D6 and weak refining margins dented profits of the Mukesh Ambani led Reliance Industries (RIL) on Friday which reported its March quarter net profit at Rs 4,236 crore against Rs 5,376 crore a year ago, a drop of 21 per cent. This was the second consecutive quarterly drop in profit of the energy conglomerate.The profit after tax (PAT) for FY 12 also declined at Rs 20,040 crore against Rs 20,286 crore YoY. The company's results lagged market estimates.Sales, however, grew 16.7 per cent to Rs 87,833 crore.Reliance, which operates the world's biggest refining complex in Jamnagar, was expected to post a net profit of Rs 4330 crore, according to Thomson Reuters I/B/E/S."Somewhere, somehow, Reliance has lost that Midas touch," said Jagannadham Thunuguntla, strategist at brokerage SMC Global Securities in New Delhi. "It is high time they gave clear indication to the analyst, investor community on how they are going to deploy that cash. Otherwise it is going to be a huge overhang," he said.Controlled by billionaire Mukesh Ambani, Asia's second-richest person, Reliance's market value tumbled by a third in 2011, mainly because of worries of falling output from its gas fields hurting growth.RIL announced a dividend of Rs 8.5 per share. The earnings per share (EPS) fell to Rs 12.9 versus Rs 16.4 YoY.Diversification SpreeThe company has embarked on a diversification spree, venturing recently into the media business and expanding its supermarkets business.Reliance, which operates the world's biggest refining complex, in Jamnagar, plans to make fresh investments in its core business while continuing to grow its retail footprint and work towards rolling out wireless data services, Ambani said in a statement on Friday.The company tied up with BP last year to increase output from some of its oil and gas blocks and is awaiting government approval for investment plans.The company held cash of $13.8 billion at March-end.Gas output from Reliance's fields off India's east coast may decline to an average 27.6 million standard cubic meters a day (mscmd) in 2012/13, about a third of what was initially estimated, a government source said in February.Production of natural gas from the KG D6 block was 551.31 billion cubic feet in the fiscal year to March 31, down 23.5 per cent from a year earlier, the company said in a statement.The company, which has a market value of $46 billion, said net profit fell 21.2 per cent to 42.36 billion rupees for the fiscal fourth quarter ended March from Rs 5,376 crore a year earlier.After profit fell for the first time in more than two years in the December quarter, Reliance moved to bolster its shares by announcing a share buyback of up to $2.1 billion, the biggest ever in India.Still, the stock has underperformed the main Mumbai market over the past 15 months.The shares have risen 5.5 per cent so far this year, lagging a 12.4 percent rise in the main stock index, in which they have the second heaviest weight. Ahead of the results, the stock closed down 1.5 percent.Refining MarginsReliance reported gross refining margins of $7.60 per barrel for the March quarter, compared with $9.20 a year earlier, but more than the $6.80 it reported in the December quarter.Its refinery at Jamnagar in the western state of Gujarat can handle less costly high-sulphur crude oil, giving it among the best refining margins in the industry. Refining accounts for nearly 80 percent of Reliance's revenue.The margins were squeezed by higher crude prices and a narrowing spread between light and heavy crude prices.Reliance's petrochemicals business posted a nearly 18 p ercent rise in revenue on higher domestic demand.Its oil and gas exploration business posted a 36.5 percent fall in revenue, mainly due lower production at its main KG-D6 block, Reliance said.Reliance, which has been looking to diversify, in January invested in India's TV18 media group and is widely expected to launch broadband services using fourth-generation (4G) technology later this year, after paying $2.5 billion for countrywide spectrum in a 2010 state auction.It has also been speeding up the opening of supermarkets across the country.Ahead of the result announcement, shares in Reliance ended down 1.5 per cent at Rs 730.85, while the broader Mumbai market fell 0.7 per cent.
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With the Prime Minister's office intervening into the deadlock over the fuel supply agreements (FSAs) between Coal India and power producers, a resolution seems closer in sight.On Wednesday, coal minister Sriprakash Jaiswal reportedly expressed the same sentiment. "I am hopeful that the issue will be resolved in 15 days and the remaining pacts will be signed," Jaiswal told PTI. He also added that the ministry could soften their stand if the PMO asked and if it was in the interest of the nation.The Prime Minister's Office has called a meeting next week to resolve the issues related to fuel supply pact, with the Power Ministry not agreeing to the PMO directive that CIL assure power firms of providing 65 per cent of the total coal contracted.The FSA issue was also discussed at a meeting called by the PMO last week. The meeting, chaired by Principal Secretary Pulok Chatterjee, was attended by Coal Secretary S K Srivastava, Power Secretary Uma Shankar and CIL Chairman and Managing Director S Narsing Rao, according to PTI."The Power Ministry is saying that banks are not accepting 65 per cent trigger level for penalty on CIL, as against the earlier directive of 80 per cent supply assurance".If resolved, this would end the long stand-off where power producers like NTPC refused to sign FSAs on account of the lax norms set for itself by India's coal monopoly. In March, after being served with a Presidential Directive, CIL had agreed to sign FSAs with 80 per cent trigger level (penalties set in for coal supplies below this amount) but with only 0.01 per cent as penalty level. Recently however, the PMO suggested 65 per cent as the initial trigger level with the usual 10 per cent penalty rate. There is also a possibility that Coal India may need to import coal — through state-owned agencies like STC and MMTC — to fulfil the FSAs. How to price this however, is still under debate."CIL may need to import if the consumers want them to. However, given that several state utilities and private companies have their own import processes in place, the quantum of imports through CIL may remain difficult to estimate," says Dipesh Dipu, Director, Consulting, Mining at Deloitte Touche Tohmatsu India Pvt. Ltd.The minister is currently in Kolkata and ministry sources say he may also take up the matter with Coal India, which is headquartered there. The company board is supposed to meet between 5th and 10th July to discuss the new FSA conditions suggested by the PMO. So far 27 of the 54 FSAs for 20,000 MW have been signed.Asked about coal production, Jaiswal said there was a need to augment it in view of the requirements of power, steel and other industries. About Coal India, he was confident that "it will record a 7-8 per cent growth this year" stressing that it will achieve the production target for the fiscal.The government has fixed a production target of 464 million tonnes (MT) for CIL, which accounts for over 80 per cent of the domestic output. Last fiscal, the PSU achieved an output of about 435 MT of coal as against a revised target of 447 MT.
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The government is looking at the possibility of allocating coal mines, which have been earmarked for the power sector in the upcoming auction of 54 mines, to new power plants only."Coal blocks for power generation would be only for the new power plants," says an official document highlighting the details of a meeting of the coal ministry held with representatives of the state governments.Of the 54 coal blocks identified by the government a couple of days back, a maximum of 16 have been earmarked for the power sector and 12 for PSUs, among others.The coal ministry also said that the state government will have to apply for the blocks earmarked for the power sector for which tariff-based bidding will have to be carried out for award of the power project, the document said.The meeting held to discuss the draft terms and conditions for allocation of coal blocks to PSUs was also attended by additional secretary Zohra Chatterji, chairman and managing director of Central Mine Planning & Design Institute Limited (CMPDIL) AK Singh among others.The government had earlier said coal mines earmarked for the power sector are meant for both tariff-based bidding and Central government companies engaged in production of power.The further earmarking would be done in consultation with the Ministry of Power and CMPDIL, it had said.The government had also earmarked 12 blocks for the steel sector, seven for the cement sector, five for sponge iron and two for surface gasification, in the forthcoming allocation of coal blocks.Earlier, Coal Minister Sriprakash Jaiswal had said the government was ready with the list of coal blocks to be put on auction and the process will begin by June.The gap in the demand and supply of coal widened to 161.5 MT last fiscal. In 2010-11, the shortfall of coal was about 132.8 MT, while in 2009-10 it was 90.5 MT, according to an official document.(PTI)
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The Prime Minister's Office has given "instruction" to the Coal Ministry to help CBI in its probe into alleged irregularities in allotment of coal mines without auction between 2006 and 2009."The Prime Minister himself wants that each and every aspect should be investigated. It is also a standing instruction by the Prime Minister's Office to cooperate in the inquiry," Coal Minister Sriprakash Jaiswal told PTI.The Coal Ministry has appointed senior officials to help the Central Bureau of Investigation (CBI) in its probe, he said.Out of over 100 firms which were allocated coal mines without auction, the investigating agency has so far collected documents relating to 68 companies, according to the Coal Ministry sources.The CBI is investigating alleged irregularities in mines allotment without auction between 2006 and 2009 after the case was referred to it by the Central Vigilance Commission.The Coal Ministry was under the Prime Minister's charge during this period.Jaiswal said, "In case any one is found guilty, stringent measures would be initiated against them."Earlier, as per a leaked draft report, the Comptroller and Auditor General (CAG) had estimated a Rs 10.6 lakh crore loss to the exchequer on account of allotment of coal blocks during 2004 to 2009 without auction.However, the government has denied it saying that the allocations were made in a transparent manner in consultations with the concerned state governments.(PTI)
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India will allow power companies to raise overseas debt to finance up to 40 per cent of their rupee debt on existing projects, compared with the current limit of 25 per cent, likely in the next seven days, a finance ministry official said.The country would also allow external commercial borrowings (ECB) for the airline industry's working capital for one year, with a ceiling of $1 billion, by end-April, said Thomas Mathew, who heads the capital markets division in the finance ministry.ECB for capital expenditure on toll systems for roads and highways will also be allowed in the next seven days, Mathew told reporters.Last month, Finance Minister Pranab Mukherjee had said in the annual budget for 2012/13 that ECB would be permitted or increased in power projects, highway toll projects, airline industry, and low-cost housing.India currently has a $30 billion overall cap on companies' overseas borrowing during a financial year. Mathew said there was currently no proposal to lift that cap, but it will be discussed if the need arises."The overall ceiling will not be a limiting or constraining factor," he added.(Reuters)
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State miner Coal India, which earlier this year reversed a price increase under pressure from power producers, reported a 5 per cent decline in quarterly profits, weighed down by stagnant volumes and a steep increase in wage bills.The world's largest coal miner said net profit fell to Rs 4,013 crore from Rs 4,221 crore a year earlier, but net sales rose 29 per cent to Rs 19,419 crore following a price increase in February last year.Analysts had forecast net profit of Rs 4,110 crore on net sales of Rs 17,940 crore, a Reuters poll of brokerages showed.Shares in Coal India, the country's fourth-most valuable company at about $36 billion, closed 0.5 per cent higher in a Mumbai market that rose 1.2 per cent.(Reuters)
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State-owned Indian Oil Corporation reported a more than three-fold jump in net profit at Rs 12,670 crore for the quarter ended March 2012. In the same period a year ago it was Rs 3,905.16 crore.Analysts expected the company to post a net profit of Rs 9,400 crore during the quarter, up 140.70 per cent YoY, according to ET Now estimates.Total income increased to Rs 1,30,305.35 crore in the fourth quarter from Rs 99,130.03 crore for the March 2011 quarter, the company said in a BSE filing.The group posted a net profit after tax & minority interest of Rs 4,225.98 crore for the year ended March 31, 2012, compared to Rs 7,830.72 crore for the year ended March 31, 2011.Total income increased to Rs 4,12,111.16 crore for the year ended March 31, 2012, from Rs 3,13,244.71 crore in the previous year.The company received a subsidy of Rs 45,485 crore towards under-recovery on sales of HSD, SKO (PDS) and LPG (Domestic) for 2011-12 against Rs 22,604.84 crore in 2010-11. After the compensation, the company had to absorb just Rs 22.37 crore loss on the four fuel.It earned $4.25 on turning every barrel of crude oil into fuel in the fourth quarter ended 31 March 2012, as opposed to $7.56 a barrel gross refining margin a year ago.In the full fiscal, GRMs stood at $3.63 per barrel compared to $5.72 a barrel in 2010-11 fiscal. The IOC board recommended a dividend of Rs 5.00 per ordinary share for the financial year ended March 31, 2012.The company has posted a net profit after tax of Rs 39,546.20 crore for the year ended March 31, 2012 as compared to Rs 7,445.48 crore for the year ended March 31, 2011. Total Income has increased from Rs 33,1526.87 crore for the year ended March 31, 2011 to Rs 43,7706.59 crore for the year ended March 31, 2012.At 02:10 p.m., the company's shares were trading 0.6 per cent higher at Rs 267. The stock has hit a high of Rs 271.10 and a low of Rs 265.10 in trade so far.
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The coal sector has seen more than its share of rough weather in the past few months — power producers complaining about coal shortage, Coal India being served with a presidential directive, the Comptroller and Auditor General (CAG) alleging undue benefits from coal block allocations. Should the sector be opened up for commercial mining? Are power producers' coal woes exaggerated? Would auctioning of captive coal assets be a better route? What ails the sector and can things can be set right? BW's Yashodhara Dasgupta spoke to Union minister of coal Sriprakash Jaiswal. Excerpts: What are the factors that are keeping coal production lower than demand?There are enough coal reserves in India that can be extracted easily. But there are immense hurdles. For one, we need environment and forest clearances. We need them not just from the central government but from the state government as well. We should be able to acquire land. People should be willing to leave the land. Then they should be rehabilitated. Infrastructure for coal mining needs be developed after this. It takes five to six years to do it all.Do you think there is any inefficiency within the coal sector?I do not deny the fact that we are absorbing all the modern technologies in India. I don't agree that this is happening. Time and again, we direct Coal India to use the most modern technology for production. We send them abroad to see the technology and use those equipments which would give the most output of coal. The challenge is big. The way that the economy is growing, till we supply sufficiently, power cannot be produced and without power, everything would come to a standstill. We always try to ensure maximum production of coal. FAST FACTS Coal strength India has a total available coalbearing area of 26,000 sq. kmPower generation India produced 423.554 billion kilowatt hours from coal-based plants during April-December 2011. This was a growth of 9.17 per cent over the same period a year agoCoal-based UMPPs Sasan in Madhya Pradesh, Mundra in Gujarat, Krishnapatnam in Andhra Pradesh and Tilaiya in Jharkhand ProductionRaw coal: 307 million tonne (MT) during Apr-Nov 2011, against 320 MT a year earlier.Coking coal: 28.3 MT, against 28.7 MT during the same period a year ago Will privatisation bring in more efficiency in the sector?This is why we have given coal blocks to the power sector. So that requirements for imports can be met through this. We have received gains of 20 per cent from it. But 80 per cent is still remaining because they are also going through the same hurdles of clearances, land acquisition and law order. For instance, Jharkhand has good availability of coal but law and order is weak. Chhattisgarh has tremendous Maoist problems. Our miners cannot go beyond a limit.What about privatisation in terms of removing Coal India's monopoly?There's no doubt that coal production can increase substantially with commercial mining. But Parliament must pass a Bill for this. This is a regulated sector that was nationalised in 1972. If you want to bring it into the open market, a new law must be passed. You can see how many problems come in a coalition government. Privatisation cannot be done in such a government.Coal India outsources some of its work to private players. Is this a way to bring in privatisation?No. Any nationalised company can bring any private contractor for any job. It has the right to do it.In the past five years, the environment ministry is supposed to have already cleared over 100 GW of power capacity. Are power producers' complaints exaggerated?None of the power plants (to whom Coal India supplies coal) has had to shut down due to lack of coal. Yes, some may have critical or super-critical stock but there are other reasons for it. Some plants produce more than their capacity and coal linkages. Some power plants are so old that they cannot run their operations within their existing linkages. They need even more coal to run their plants. Some power plants were supposed to import say, 20 per cent coal but they didn't do so. That's why their stock position is at critical level. But all in all, no power plant will shut down due to non-availability of coal.In the past few years, was power capacity added in haste without checking coal linkages etc?Assessments are always done. But sometimes actual figures fall short of the assessments. Like I said, there are many problems and these are increasing by the day especially in the past 5 years. For instance, land acquisition was not an issue 5 years back. People have become more aware now and don't want to give up their land. They ask for random amounts of money. When the assessments were done, we were sure it would be met. There are many reasons for failing to meet the mark.Would auctioning be a better method than First Come First Serve?With auctioning, nobody will get the scope of raising fingers. Yes, power tariffs will rise with auctioning, but at least nobody can say there was favouritism involved in the allocations. This is the biggest benefit of auctioning coal blocks. It is in the final stages. Identification of coal blocks has been done. We have engaged consultants (Crisil) to decide the methodology. Their report should be in within a month. We will proceed according to the method suggested by the consultant.Can PSUs can now sell coal from their captive blocks in the open market?If state governments want, they can sell coal from their allotted blocks to the market. But the coal blocks to the private sector are only for end-use purposes.Wouldn't the proposed coal regulator overstep into the jurisdiction of the Coal Ministry?We have prepared the Bill and placed it in front of the Cabinet. Some of them have objected to it. To resolve those issues, we've referred it to the GoM. Even if this overlaps in our jurisdiction, let it. If things get better because of it, we have no issue with it. Its biggest responsibility will be increasing production, looking into safety issues and coal pricing.What is the purpose of the new fuel supply agreements (FSA)?All the power plants – to whom the government had given commitments – are almost ready. It would be an injustice if we tell them we will supply only 50 per cent of the contracted amount. Why should they sign PPAs if we tell them to import the remaining 50 per cent? FSAs have been done for them – to supply at least 80 per cent of their coal requirement. They can buy the rest through e-auctions and imports. The responsibility is ours as we had made the commitment. The way the production has been increasing, Coal India and its subsidiaries are quite capable of meeting their commitments. Also, for a year, it did not have a chairman. It's only now that they've got a proper chairman – one who knows the mining sector and has administrative knowledge.There were reports that NTPC does not want to sign the FSAs. Why?NTPC is unhappy with the penalty clause of 0.01 per cent. Both NTPC and other private players are objecting to such a low penalty rate. The contention is, if Coal India defaults on coal supply, what can you do to them? Of course, it's a commitment of the government of India. They will get the coal. But their demand is justified. With such a low penalty rate, there will be no apprehension on defaulting. At the time of the Presidential Directive, the decision on penalty was left to Coal India so it could reduce it a bit if it wanted to. But we did not expect them to lower to this level. Anyway, the FSAs are being signed. About 18 have been signed so far. We'll talk to Coal India if it becomes necessary.What do you think about the Sasan coal blocks issue?This has been referred to the GoM. They will decide on it. Coal Ministry has no role in it.Your comments on the CAG's new report on coal block allocations?We have not received any report yet. And anyway, we have answered all questions related to allocations on our website. We do not know any specifics of the report yet. The interview was conducted in Hindi(This story was published in Businessworld Issue Dated 04-06-2012)
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