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Positive tidings fail to cheer Aban stock

Positive tidings fail to cheer Aban stock
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First Published: Tue, May 25 2010. 10 20 PM IST

Graphic: Naveen Kumar Saini/Mint
Graphic: Naveen Kumar Saini/Mint
Updated: Tue, May 25 2010. 10 20 PM IST
Aban Offshore Ltd’s March quarter net profit was affected by sizeable foreign exchange losses and write-offs. Foreign exchange-related losses were Rs74.4 crore on a stand-alone basis and Rs120.3 crore on a consolidated basis.
The offshore drilling services company also wrote off equipment expenses of Rs121 crore during the quarter. As a result, its consolidated net profit fell by 56% sequentially to Rs39.3 crore.
Graphic: Naveen Kumar Saini/Mint
Adjusting for these expenses, however, net profit would have nearly tripled sequentially to Rs280 crore. Revenue growth has been healthy, as 18 out of 20 assets have been contracted out, rising by 21% sequentially and 32% year-on-year (y-o-y) to Rs1,021 crore.
Meanwhile, Aban announced a four-year contract for one of its assets in West Asia, with a contract value of $187 million (Rs886.38 crore). Operations are expected to start in the second half of 2010 and the day rate of $128,000 is better than the prevailing market rate, according to analysts.
It will add partly to earnings growth in fiscal 2011 but will not be sufficient to compensate for the loss of its highest earning asset, Aban Pearl, which sank recently. Aban Pearl contributed to nearly one-third of the company’s revenue. The firm has said that it is looking for an alternative asset to take its place.
Equity funding to reduce its highly leveraged balance sheet is a key event for Aban. The management has approved a fund-raising proposal of $400 million through overseas instruments. It has also approved a qualified institutional placement equity issue of up to Rs2,500 crore.
The company carries a huge debt of around Rs16,400 crore as on 31 March. Plans to repay nearly Rs4,800 crore in fiscal 2011 and 2012, partly through cash flows from Aban Pearl’s deployment, have run aground after the rig sank.
Shares of the company had plunged after the mishap a fortnight ago and investors saw nothing in the results and other announcements to justify a recovery in its share price. Analysts say that once there is clarity on the actual loss of earnings due to the sunk asset, which will become evident in future results, valuations will adjust.
A successful completion of its fund raising plans, too, could provide some relief, though the extent of dilution involved will be a concern. The stock closed down 1.9% at Rs688 on the Bombay Stock Exchange, while the benchmark Sensex declined 447.07 points, or 2.7%, to close at 16,022.48 points.
Write to us at marktomarket@livemint.com
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First Published: Tue, May 25 2010. 10 20 PM IST