Essar Oil registers Q2 loss of Rs 71 crore on lower opg margins
Oct 25 2013 , Mumbai
The earnings before interest tax depreciation and amortisation (Ebitda) fell 12 per cent during the period to Rs 1033 crore as the gross refining margin (GRM), the difference between the price of crude and selling price of the refined products, fell to $6.93 per barrel against $7.83 per barrel mainly due to sharp reduction in the benchmark IEA margins.
The company largely escaped the terrible demand situation in the domestic market due to extremely good and extended monsoon by increasing sales from exports to around 54 per cent from 30 per cent last year same quarter. “However, the margins from exports are lower compared to domestic sales. This also contributed to lower margins,” said LK Gupta, MD of Essar Oil. The margins in domestic market is much higher compared to global markets for Essar Oil.
Gupta further added that despite a sharp reduction in benchmark margins by about $3.8 per barrel the GRMs have been impacted only by a small measure. “Our GRM premium over the IEA benchmark expanded to $8.23 per barrel during the quarter, against $5.4/bbl in the same quarter last year. Also, with clarity emerging on deregulation of diesel, we are now looking at expanding our retail network, which going forward will be a big value booster for the company,” said Gupta.
The company is planning to increase the total retail outlets to around 3000 in the next four years. “At present we have around 1400 outlets with another 200 in various stages of construction. We hope to add the rest across India over the next four years as the process of deregulation has started and we believe it would be fully deregulated during this period,” said S Thangapandian, director marketing of Essar Oil.
“At present the company is not having a loss since we are focussing only on one category of oil that is petrol at all our 1400 outlets. Besides we have also increased our focus on bulk diesel distribution that has been fully deregulated. Our total supply of bulk diesel has increased to 17,000 kilo litre compared with 1000 kilo litre in the first quarter of the current fiscal. We will continue to focus in the Southern and the Western region with the exception of Defence and Railways who have not approached us yet in bulk segment, ”added Thangapandian.
The company has also re-approached the Supreme Court to seek the sales tax deferral for the Vadinar Refinery in Gujarat after the Central Government has given around Rs 3,700 crore worth of interest free deferral for 15 years to the latest Barmer refinery of HPCL in Rajasthan. “We have already paid three instalments till September and have requested the apex court to consider our case, since refinery is a capital intensive project and there is huge pressure of economic downturn and slackness in demand,” said Gupta.
Essar Oil is also awaiting the government decision on the CBM gas pricing before it moves with the second phase expansion of its Raniganj refinery which is currently producing around 100,000 standard cubic meters per day (scm/day) of gas with peak production capacity of 3mmscmd. “The second phase of expansion was expected to see drilling of around 170 wells with an investment of around Rs 1700 crore. However, that was to happen few years back. Now the lenders are revaluating the project cost which is expected to have gone up,” said Suresh Jain, chief financial officer of Essar Oil.
Besides the company has also dollarised around $50 million worth of Rupee loan and expects to dollarise aorun $2.7 billion during the current fiscal year. The net debt as of September 30, 2013 stood at Rs 18,000 crore.