Lack of large new order wins—an overhang for Shiv-Vani Oil & Gas

Lack of large new order winsan overhang for Shiv-Vani Oil & Gas

After a disappointing September quarter, which tends to be weak on account of the monsoons, Shiv-Vani Oil and Gas Exploration Services Ltd has put in a strong performance in the December quarter.

Consolidated revenue increased by about 7% year-on-year to 375 crore. Though that does not appear impressive, revenue growth compares favourably with the 10% revenue contraction seen in the September quarter. Analysts attribute the growth to the revival in the seismic business and better asset utilization.

Shiv-Vani’s operating profit margins improved by 370 basis points to 48.2% from 44.4% in the corresponding period last year. One basis point is one-hundredth of a percentage point.

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This operating margin excludes the currency fluctuation impact. The operating performance was better than the September quarter as well.

Operating profit increased by 16% to 181 crore, but net profit grew at a much faster pace of 21% to 70 crore thanks to considerable decline in tax outgo. That’s much better than the 42% decline the company had seen in the September quarter net profit.

Shiv-Vani has an order book of 3,000 crore, which is more than two times its FY10 revenue, and offers decent revenue visibility going ahead.

But investors do not seem particularly thrilled about the company’s performance in December. The scrip has declined by 6% since it has announced financial results to 239 per share compared with the 3.5% decline in the BSE-500 index on the Bombay Stock Exchange.

The stock’s performance is even more disappointing over a longer timeframe. It has declined sharply by 46% since the beginning of the fiscal against the 3% drop in the BSE-500 index.

For one, investors seem to be concerned about the lack of new large orders for the firm from Oil and Natural Gas Corp. Ltd and Oil India Ltd, who happen to be the company’s key customers.

“Secondly, Shiv-Vani has twice raised funds in the recent past, but with no new orders (hence no new assets) and no acquisition plans, the unutilized funding has acted as an overhang on the stock," wrote analysts from Elara Securities (India) Pvt. Ltd in their post results note.

Large orders should act as a positive trigger for the stock.

Graphic by Ahmed Raza Khan/Mint