R-Power profit surges fivefold on other income

R-Power profit surges fivefold on other income

Mumbai: Anil Ambani-promoted Reliance Power Ltd (R-Power), yet to fully operationalize its first power plant, posted a fivefold rise in net profit on the back of a surge in “other income" for the July-September.

Reliance Natural Resources Ltd (RNRL), also promoted by Ambani to undertake fuel sourcing and marketing for his other group firms, saw a slight rise in net profit as well. It, too, was supported in good measure by the “other income" component.

Other income refers to earnings from activities other than the firm’s core operations.

R-Power had a net profit of Rs194.53 crore for the quarter ended 30 September, a rise of 422% from Rs37.22 crore in the year-ago period. R-Power, which is setting up 16 medium and big power projects that will collectively generate 33,480MW of electricity, had no operational income since all its power plants are under construction.

R-Power’s profit, however, was buoyed by other income of Rs246.15 crore this quarter, up from Rs57 crore in the year-ago period. Chief executive J.P. Chalasani explained this was from the interest earned on the firm’s cash holdings and various investments.

A Mumbai-based sector analyst working with a domestic brokerage, who did not want to be named as his firm bars him from direct media interaction, said that since the company had “no operating assets, the results gave no incremental information" and added that he was waiting for its power projects to come on stream for any meaningful analysis of the firm’s business.

R-Power, which has won three ultra mega power projects auctioned by the government—in Tilaiya, Sasan, and Krishnapatnam, each generating more than 4,000MW—also incorporated three subsidiaries in the July-September quarter: Amulin Hydro Power Pvt. Ltd, Emini Hydro Power Pvt. Ltd and Mihundon Hydro Power Pvt. Ltd.

It mopped up Rs11,563.20 crore in a blockbuster initial public offer in February 2008, before a global financial meltdown squeezed credit availability and fund-raising activity. Of that money, the company statement explained, it has utilized a little under one-third, or Rs4,244.37 crore. The unutilized amount is spread across “investments in liquid and fixed maturity funds" with Rs7,224.73 crore, another Rs3 crore as a “deposit with the Bombay Stock Exchange Ltd" and Rs91.1 crore as “bank balance in current account including fixed deposit receipts", it added.

R-Power also plans to build a 7,480MW gas-fired power plant in Dadri, Uttar Pradesh, procuring the feedstock from RNRL—a deal key to the business model of the fuel supplying firm. RNRL net profit rose marginally to Rs21.15 crore from Rs20.10 crore, boosted by other income.

RNRL is locked in a lawsuit with Mukesh Ambani’s Reliance Industries Ltd over receiving 28 mscmd gas for 17 years at a price 44% cheaper than the state-approved price.