Mumbai: A near-doubling of refining margins helped country's second largest private refiner Essar Oil clock a post-tax profit of Rs 200 crore in fourth quarter ended March 31 compared to a Rs 608 crore net loss in the same period last year.
The Ruias-promoted company's gross refining margins (GRMs) nearly doubled to USD 9.06 per barrel, up from USD 4.60 a barrel a year ago.
Essar Oil Managing director and Chief Executive L K Gupta attributed the jump in GRM to higher complexity benefits of its refineries, wherein it was able to use more of the low cost but heavy crude and yet refine it to deliver lighter products.
Besides this, the overall margins situation in the industry was also very good, which helped the GRMs, he told reporters at the Essar Group headquarters here after announcing the results.
Helped by the capacity expansion and optimisation at its refineries, the company's revenues grew 34 percent to Rs 25,757 crore in Q4, while the pre-tax profit was up 254 percent to Rs 1,556 crore as compared to last year.
Going forward, the company is targeting to take up its pre-tax profit to USD 1 billion, Chief Financial Officer Suresh Jain said, adding a greater emphasis will be on "dollarisation", or converting its rupee debt into foreign currency loans to lower the interest costs.
Essar Oil used USD 480 million, of the USD 2.7-billion external commercial borrowing window given by the Reserve Bank, so far and will exhaust the balance limit in the next six months, he said.
"We save 6 percent on interest rate in dollarisation and the total benefits which this would have, would be USD 180-200 million per annum," Jain said.
The company's debt-to-equity ratio stands at 7:1 at present, Jain said, adding he would like it to stabilise at 2 to 2.5 times of the pre-tax profit.
Essar Oil scrip ended up 1.77 percent at Rs 83.25 apiece on the BSE, whose 30-share benchmark closed the session up 0.72 percent.
Going forward, as the government continues with its drive to get diesel prices at par with market rates, the company will also focus more on retail in the domestic market, Gupta said.
Essar Oil's share of the domestic business grew to 69 percent of the total revenue pie from the preceding quarter's 65 percent and Jain said it will aim at stabilising the number in the 65-70 percent range in FY'14.
On the issues surrounding dealings with Iran, which has been placed under global sanctions, Gupta said Essar Oil is complying with the existing guidelines on import limits and payments as prescribed by the Indian government.
"We are importing within the permissible limits set by the government guidelines. Last year, we imported 40 percent of our total crude from Iran, but this year, with the expansion, it came down to 20 percent," Gupta said, but declined to elaborate due to the sensitivity of matter.
There was also a Rs 111-crore one-time exceptional item which ate into the company's bottom line and Jain described it as the interest rate impact following the corporate debt restructuring. The company exited the CDR mechanism in March 2013.
First Published: Friday, May 10, 2013, 21:13