Other income powers Reliance Energy

Other income powers Reliance Energy

The Anil Dhirubhai Ambani Group’s flagship and power utility Reliance Energy Ltd (REL) reported a 50% rise in net profit for the three months to December as compared to a year ago on the back of higher other income and a higher price per unit of power.

A tax refund of Rs89.50 crore also helped Reliance Energy boost profits for the quarter. The company also reported an income of Rs60.02 crore for the three months ended December through hedges against currency fluctuations.

Reliance Energy, headed by RIL chairman Mukesh Ambani’s estranged younger brother Anil Ambani, and supplies power to the suburbs of Mumbai, reported a net profit of Rs301.60 crore in the quarter, against Rs201.03 crore in the year-ago quarter.

The firm’s cost of power rose 30% from Rs4.10 per unit to Rs5.40 per unit over the same period. This is reflected in its profits as it is passed on to customers.

The company’s stock quadrupled in value in 2007, the biggest gain among stocks that are part of the Bombay Stock Exchange’s benchmark Sensex. Reliance Energy’s shares lost 2.38% and closed at Rs2,212.70 each on the Bombay Stock Exchange on a day the exchange’s benchmark index lost 0.84%.

The company ended the December quarter with revenues of Rs1,853.41 crore as compared with Rs1,820.43 crore for the same period last year. However, gross profits from electricity sales and EPC, or engineering, procurement and construction, contracts declined from Rs76.68 crore in the third quarter of 2006-07 to Rs74.13 crore this year, with the company’s income from its EPC business coming down sharply to Rs276.08 crore from Rs612.63 crore.

Mehul Mukati, an analyst at Emkay Shares and Stock Broking Ltd, said the growth in EPC income last year was on account of a large number of rural electrification projects the company completed.

Mukati said he expects Reliance Energy’s EPC income to grow over the next few quarters because it will execute all projects of its subsidiary Reliance Power Ltd.

Reliance Power will operate the three 4,000MW power projects at Sasan in Madhya Pradesh, Shahpur in Maharashtra and Krishnapatnam in Andhra Pradesh.

Reliance Power, half owned by Reliance Energy, is seeking to raise as much as Rs11,700 crore through an initial sale of shares. The issue, which opened on Tuesday, was subscribed 27 times according to data available at 7pm Thursday evening, receiving 2.7 million applications worth Rs2.45 trillion.

The retail portion of the issue, 30%, was subscribed 5.75 times. After the share sale, Reliance Energy’s holding in Reliance Power will come down from 50% to 45%.

Reliance Energy had said earlier that it would spin off its EPC business into a separate company but did not say when this would happen.

Meanwhile, another Adag firm, Reliance Natural Resources Ltd, which handles the group’s fuel handling and processing business, reported a net profit of Rs23.8 crore for the December quarter against Rs10.4 crore for the same period last year.

The company’s total income declined from Rs121.15 crore to Rs90.42 crore, but it posted a higher net profit because its expenses dropped sharply.

India plans to add 78,577MW of capacity in the five years to March 2012 to partly bridge a 13% shortfall in peak demand, the government has said. About 400 million Indians do not have access to electricity, according to the United Nations’ Human Development Report of 2007.

Archana Chaudhary and Manash Goswami of Bloomberg contributed to this story.