Lanco net profit drops 39% on high interest costs

Chennai: Lanco Infratech Ltd, India’s largest independent power producer, on Wednesday reported a 39% drop in quarterly net profit on account of higher interest costs and lower capacity utilization in its power business.

Consolidated net profit after adjustment for the quarter ended 31 March fell to Rs 161.3 crore from Rs 266.4 crore a year earlier, though revenue rose 43% to Rs 4,442.2 crore. For the full fiscal year, net profit declined 16% to Rs 684.3 crore, while revenue grew 37% to Rs 15,398.1 crore. Lanco’s construction business recorded a year-on-year growth of 57% to Rs 2,562.6 crore. The firm has an order book of Rs 26,554 crore, including 73% from group projects.

The company’s power business, a key revenue generator, declined 3% to Rs 1,104.4 crore. Lanco has an installed capacity of 4,110 megawatts (MW) across thermal, gas, solar and hydropower projects. Its operating capacity is 3,254MW. Another 4,968MW of capacity is under construction. Average plant load factor (PLF), an indicator of a power plant’s capacity utilization, was 61%. The “Anpara (project) started generation from January. It will take six months to stabilize, it’s in the initial phase of stabilization, so the PLFs are quite low,” said T. Adi Babu, chief operating officer of finance and financial controller. “Regarding Udupi, PLF has improved in the last quarter, but the recovery of the fixed charges is not total because of below average PLF in previous quarters.”

Lanco Anpara, a 1,200MW thermal power project in Uttar Pradesh, showed a PLF of 38%. Lanco Udupi Power, a 1,200MW thermal power project in Karnataka, registered a PLF of 89%. And Lanco’s 734MW power plant in Kondapalli, Andhra Pradesh, was running at a PLF of 50% due to a shortage of gas supply from Reliance Industries Ltd’s Krishna-Godavari basin, Babu said. Lanco said it plans to raise $600-750 million by selling stakes in its power business. It also plans to sell its two road assets in Karnataka.

Lanco’s highways portfolio comprises the 283km Aligarh-Kanpur (NH-91) project in Uttar Pradesh; the 82km Neelamangla Junction (Bangalore)–Devihalli (NH-48) project, and the 81km Bangalore–Hoskote–Mulbagal (NH-4) stretch. The Karnataka projects earn revenues through collection of toll fees.

“We are having dialogue with investors, it will take another 45 days for us to conclude the (road assets) deal,” Babu said, without giving any financial details. “The capital raised will be used to invest in new projects.”

Lanco has a gross debt of Rs 30,857.6 crore, excluding the acquisition debt of Griffin Coal and the working capital loans of its power companies. With nearly all of Lanco’s power and road projects either already or set to begin operating, the company will “start getting the returns, regular repayments, and the surplus available will be used to reduce debt”, Babu said.

Lanco, which bought Griffin coal mines in Australia for A$730 million in March 2011, said it is in the process of getting approvals, expected in six months to one year.

The company plans to ramp up capacity at the mines to 18-20 million tonnes (mt) by 2017, from 4 mt now. Lanco shares declined 3.24% to Rs 12.53 on Wednesday. The benchmark Sensex fell 0.77%.