X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Cairn India: A weak quarter - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Cairn India: A weak quarter
Jul 23, 2015

Cairn India Ltd has announced results for the quarter and the year ended June 2015. The topline registered 41% decline on a year on year (YoY) basis during the quarter while net profit declined by 23.6% YoY. Here is our analysis of the results.

Performance summary
  • Topline for the quarter declined by 41.4% year on year (YoY).
  • The operating profits for the quarter declined by 57.7% YoY, with margins at 49.1% versus 68.1% in 4QFY15.
  • The company reported 23.6% YoY decline in the net profit.
  • The Board of Directors in their recent meeting have approve a Scheme of Arrangement (implementation subject to receipt of approvals from non promoter group of shareholders and other relevant regulatory authorities) as per which the company is proposed to be amalgamated into its parent company, Vedanta Ltd with effect from 1 April 2015 or such date as may be approved by the High Court.
Consolidated financial snapshot
Rs m 1QFY15 1QFY16 Change
Sales 44,829 26,271 -41.4%
Expenditure 14,304 13,367 -6.6%
Operating profit (EBDITA) 30,524 12,904 -57.7%
Operating profit margin (%) 68.1% 49.1%  
Other income 4,184 3,816 -8.8%
Interest 16.5 16.2 -1.8%
Depreciation 7,198 8,766 21.8%
Extra ordinary items items (15,285) 1,820 nm
Profit before tax 12,208 9,758 -20.1%
Profit before tax margins (%) 27.2% 37.1%  
Tax 1,279 1,408 nm
Profit after tax  10,929 8,350 -23.6%
Net profit margins (%) 24.4% 31.8%  
No. of shares   1,875  
Diluted earnings per share (Rs)*   22.5  
P/E ratio* (x)   7.9  
*On a trailing 12 months basis

What has driven performance in 1QFY16?
  • Gross production volume across Rajasthan, Cambay and Ravva assets stood at 19.1million barrel oil equivalent per day (boepd), of which Rajasthan's share was 82%.In terms of net working interest production per day, the company witnessed a decline of 6% YoY (down 2% QoQ). The average realization for the quarter declined by 42% YoY for the quarter (grew by 16% on a sequential basis). Further, there was an increase in the share of Profit Petroleum payable to the Government of India

  • Operating margins for the quarter declined to 49.1% from 68.1% in 1QFY15. Barring exploration costs write off, the company witnessed an increase across cost heads (as a % of sales). As per the management, there has been an improvement of around 10% in Rajasthan's per unit operating expenditure

  • The bottomline of the company declined by 23.6% YoY mainly on account of lower realizations and tax outgo. The decline was made less severe than the performance at operating level because extra ordinary items pertaining mainly to forex gains and change in depreciation policy. The depreciation cost was higher by 21.8% YoY while other income declined by 8.8% YoY.

    Cost breakup
    Rs m 1QFY15 1QFY16 Change
    Production expenses 3,282 4,781 45.7%
    as a % of sales 7.3% 18.2%  
    Employee benefit expenses 404 323 -20.0%
    as a % of sales 0.9% 1.2%  
    Statutory levies 7,292 6,911 -5.2%
    as a % of sales 16.3% 26.3%  
    Other costs 780 528 -32.3%
    as a % of sales 1.7% 2.0%  
    Exploration costs w/off 2,546 824 -67.6%
    as a % of sales 5.7% 3.1%  
    Total costs 14,304 13,368 -6.5%
    as a % of sales 31.9% 50.9%  
What to expect?
The company's cash flow from operations for the quarter stood at around Rs 13 bn and it closed the quarter with around Rs 165 bn of cash balance.

Cairn's prospects will depend upon oil prices, exchange rates, regulations (such as regarding share of Profit Petroleum , cess,  tax obligations etc)  and production levels. While the stock at a trading twelve months price to earnings ratio of around 7.9 times may seem attractive; management intent, because of cash utilization issues and recent amalgamation plan remain key concerns for minority shareholders. As per the recent reports, Cairn Energy has raised objections to the same on account of valuations.  We recommend investors to avoid buying the stock at current prices.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  4. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

CAIRN INDIA SHARE PRICE


Apr 25, 2017 (Close)

TRACK CAIRN INDIA

  • Track your investment in CAIRN INDIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

CAIRN INDIA - IOC COMPARISON

COMPARE CAIRN INDIA WITH

MARKET STATS