Mumbai: Reliance Power Ltd’s (R-Power) September quarter profit was little changed from a year earlier as higher revenue from its power plant in Uttar Pradesh was offset by lower income from its financial investments.
The power generation arm of the Anil Ambani-led Reliance Group reported a net profit of Rs 235.47 crore in the three months ended 30 September, compared with Rs 234.8 crore in the year earlier.
A file photo of Anil Ambani (Bloomberg)
The company posted a robust year-on-year growth of 189% in its net sales to Rs 487.54 crore in the same period, driven mostly by a higher revenue from its 600 megawatts (MW) thermal power plant in Rosa, Uttar Pradesh. Revenue from the Rosa project tripled to Rs 171 crore.
R-Power’s shares gained 3.52% on the Bombay Stock Exchange (BSE) on Tuesday to close at Rs 102.80, outperforming the benchmark Sensex that gained 0.04%.
While Rosa’s performance helped R-Power report an operating profit of Rs 90.76 crore versus a loss of Rs 8.79 crore in the corresponding quarter of last fiscal, so-called other income consisting of treasury income for the September quarter dropped 23.4% to Rs 263.14 crore.
R-Power chief executive J. Chalasani said other income was down on account of lower investments, as the company uses more of the shareholders’ funds available with it for capital expenditure related to projects. These funds were earlier parked in various investment schemes. R-Power had raised Rs 11,563.20 crore in an initial public offering of its shares in January 2008.
The company’s notes to accounts said other income and net profit would have been lower by Rs 77.11 crore and Rs 61.69 crore, respectively, but for a change in accounting policy.
According to the changed policy, R-Power’s income from investments in debt schemes of mutual funds under a fixed-maturity plan are recognized in each quarter “based on the net asset value on the reporting date”, instead of waiting for the same to actually accrue to the company on maturity.
Justifying the change in policy, Chalasani said the earlier policy of waiting for the money to flow to the company “was not reflecting a true picture” of its earnings from investments. “There was a huge income in a quarter when a fund matured, and a sharp drop in other quarters,” Chalasani said. “So we decided to account for the income in each quarter even if the money is not with the company; it is held by the trustees of the mutual fund on its behalf.”
A number of R-Power’s projects making progress has also helped Reliance Infrastructure Ltd (R-Infra) post a robust year-on-year growth in revenue, though the company’s profitability remained flat.
The infrastructure services arm of the Reliance Group posted a 44% rise in total operating income from a year earlier to Rs 5,729 crore, while its profit was almost unchanged at Rs 361.63 crore in the same period.
R-Infra’s income from its engineering, procurement and construction (EPC) business more than tripled to Rs 2,211.31 crore for the September quarter. The company’s EPC division executes a number of projects for its other verticals such as metros and roads, as also for R-Power.
A rise in revenue from the EPC business was also accompanied by a threefold rise in cost of materials and sub-contract charges to Rs 1,847.54 crore, which eroded profitability.
On a sequential basis, R-Infra saw its net profit decline by 12%.
R-Infra chief executive Lalit Jalan said the sequential decline in net profit was because of a mark-to-market (MTM) loss of around Rs 57 crore on account of foreign exchange fluctuations. MTM is an accounting practice of valuing financial assets in accordance with their market price and not the acquisition price.
The company’s operating income was expected to benefit in the coming quarter from more EPC projects coming on stream and the firm’s Delhi Airport Express metro rail project garnering more advertising and retail revenue, Jalan said.
R-Infra’ share price gained 3.81% on the BSE on Tuesday to end trading at Rs 475.50. The company reported its earnings after the close of trading.
Ravindranath Nayak, a senior analyst with SBI Capital Securities Ltd, said R-Power’s earnings were on expected lines, but R-Infra’s numbers weren’t that great. “R-Infra’s profit would have been further down if the company had not changed its depreciation policy with retrospective effect,” Nayak said.
Makarand Gadgil contributed to this story.