Mumbai: Reliance Power Ltd (R-Power), the power generation arm of the Anil Ambani-led Reliance Group, posted a 42% jump in net profit for the quarter ended 31 December to Rs 203.87 crore, beating analysts’ estimates.
A consensus of the earnings estimates put out by analysts, compiled by
Bloomberg, had pegged R-Power’s net profit at Rs 167 crore and net sales at Rs 494.05 crore.
The rise in profitability was accompanied by an 82% year-on-year (y-o-y) rise in revenue to Rs 457.26 crore in the same period.
The increase in the company’s earnings was primarily driven by operating revenue from its 600MW (megawatt) power plant in Rosa, Uttar Pradesh, which almost doubled y-o-y to Rs 441 crore, from Rs 241 crore. Net profit from the generating asset also grew to Rs 75 crore in the December quarter from Rs 40 crore in the year-ago period. R-Power’s profit was also boosted by a higher other income of Rs 216.82 crore, which was double of what it had in the same period of the last fiscal.
Share prices of R-Power gained 1.42% on BSE on Monday to close at Rs 106.80 per share. The bourse’s benchmark Sensex gained 0.14%.
Over the last one year, R-Power has lost 7.05% while the Sensex rose 0.25%.
On a sequential basis, R-Power’s net profit fell 13.4%, while revenue declined 6.2%.
Jayarama Prasad Chalasani, chief executive of R-Power, said since the company used a higher proportion of domestic coal to generate power at Rosa, the company’s revenue was marginally affected, though it had no bearing on the operating profit from the Rosa power plant.
Since domestic coal is cheaper than imported coal and the price of the fuel is a pass-through cost for power producers, a higher proportion of domestic coal consumption implied lower revenue for R-Power.
Around 63% of the coal used by R-Power in the December quarter came from domestic sources, compared with 57% in the trailing quarter. The net profit achieved by the Rosa plant remained constant at Rs 75 crore over the last two quarters, Chalasani said.
R-Power’s net profit came down on a sequential basis due to a quarter-on-quarter decline of 17.6% in other income.
R-Power’s other income mostly consists of treasury operations yielding returns on the money it had raised through an initial public offering (IPO) in 2008, pending deployment for projects.
R-Power had raised Rs 11,200 crore through its IPO, the largest to hit the Indian capital markets at the time.
As different projects announced by the company are getting executed, its other income from such treasury operations has come down.
On 7 February, R-Power announced that at its 2,400MW gas-based power plant in Samalkot, Andhra Pradesh, was ready to start producing power. Chalasani said that since the Samalkot project was ready to generate power within the 11th Five Year plan period that ends on 31 March, and was thus eligible for gas allocation as per the government’s guidelines, he was “optimistic” that it will be allocated the requisite gas at an ensuing meeting of an empowered group of ministers that decides on such issues.
The Samalkot plant would require around 9.67 million standard cubic metres (mscmd) of gas. Due to a shortage of domestic gas production, most notably at the D6 offshore gas field operated by Reliance Industries Ltd, operations of several companies dependent on this fuel have been affected, especially power and fertilizer firms, which are identified as priority consumers of such gas.
Many companies have been forced to import significantly more expensive liquefied natural gas, which has pushed up operational costs.
“We are optimistic that we will get the gas,” Chalasani said. “Depending on how much gas we get from the government, we will have to see what other strategies we need to explore to be able to run the plant at full capacity.”
“Reliance Power has been in a period of gestation with many of its projects in a nascent stage or in construction phase,” said Jagannadham Thunuguntla, head of equities at SMC Capitals Ltd, a New-Delhi based brokerage. “The company should begin to realize its full potential in the next five-six quarters when more of its projects come onstream.”
Chalansani reiterated that R-Power will achieve a power generating capacity of 5,000MW by December 2012.
R-Power has sued HT Media Ltd, publisher of Mint, in the Bombay high court over a 12 May 2010 front-page story in Mint that it disputed. HT Media is contesting the case.
aveek.d@livemint.com
Also Read |Reliance Power profit up 42%, but stock re-rating may take time