Essar Oil posts Rs 71 cr loss for July-Sept quarter

The company had posted a net profit of Rs 105 crore in the same period a year ago

Carrying on with losses second time in a row, Essar Oil posted a loss of Rs 71 crore for quarter ending September 2013.

Lower global refining margins dented the profitability of the largest private sector fuel retailer. It had posted Rs 150 crore profit in the same quarter last year.

“IEA benchmark margins dropped sharply to negative $1.3 per barrel in the second quarter from $2.46 in the same quarter last year, impacting the financial results,” the company said.

The company's gross refining margins were at $6.93 per barrel as compared to $7.86 barrel last year. Essar also expects international refinery margins to improve in the next six months.

The quarter's revenues increased 19 per cent to Rs 27,392 crore as compared to Rs 23,023 crore, due to higher sales as well as the positive impact of Rupee depreciation on this export oriented refinery.

The company booked forex losses of Rs 773 crore. The chief financial officer, Suresh Jain said that Rupee depreciation helps the company. However, since there is a 15 day time lag in pricing in India, it is reflected on the balance sheets. “The realisation will come from sales in the next quarter,” he said.

Essar Oil is already operating an optima plus project with low capex initiatives to improve the margins of its refineries. “It will increase the GRM by $1-1.5 per barrel in the next three years,” said L K Gupta, managing director of Essar Oil.

Essar which recently came out of corporate debt restructuring (CDR) also said that it plans to dollarise a significant portion of its Rupee debt. While it has permission from the Reserve Bank of India (RBI) to dollarise about $2.2 billion, it also already sought permissions to take it to $2.7 billion.

The refining major is also hoping to reverse the Rs 6,165 crore sales tax judgement passed by the Supreme Court, last year. The company pleaded the court to let it enjoy the incentives of the tax rebate. It said that recently HPCL's Barmer refinery received a Rs 3,700 crore interest free loan annually, which is repayable over the next 15 years.

“We are the only refinery which has not received any incentive. We will request the Supreme Court to look into the matter with a three person committee. All state governments give some sort of incentive when refineries are set up in a state,” said Gupta. The company also asked the government to give it more time to repay the sales tax amount, as directed by it.