Essar Oil slips into net loss after tax provision

Essar Oil on Friday announced it would raise Rs 3,000 crore of fresh equity through issue of preferential shares or a rights issue. The company also reported a net loss of Rs 3,990 crore for the third quarter ending December 2011, after making a Rs 4,015 crore provision towards deferred sales tax. Lower crude throughput and a weak refinery margin contributed. The company's profit for the same period last year was Rs 273 crore.

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Chief executive officer and managing director L K Gupta said the company was considering options for equity infusion to boost net worth and shore up liquidity. It is proposing to request Essar Energy Plc, its parent company, to convert its foreign currency convertible bonds of Rs 1,396 crore in Essar Oil to equity immediately, and raise fresh equity capital of approximately Rs 3,000 crore in the next 12-15 months.

Pending a decision in the review petition at the Supreme Court, seeking a review of the apex court's order setting aside the Gujarat high court ruling in the sales tax deferment benefit case, the company has reversed the income of Rs 4,015 crore as an exceptional item during the current quarter.

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Revenue for the quarter remained almost flat at Rs 13,897 crore, compared with Rs 13,809 crore during the same period in 2010-11. The refining margin for the quarter declined to $6.07 a barrel from $7.21 a year earlier. On the refinery business, Gupta said, "Our single-minded focus is on completing the Phase I expansion and optimisation projects at the Vadinar (Gujarat) refinery by March 2012 and September 2012, respectively. This will unlock substantial value for our shareholders by way of improved GRMs (gross refinery margins), higher Ebitda (earnings before interest, taxes, depreciation and amortisation) and better cash flows."

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He said dues on oil imports from Iran were about $1.2 billion (Rs 5,900 crore). The company is in a deal with Iran to buy up to five million tonnes of crude oil annually until March 2013.