Number of loss-making companies moderate for first time in 7 quarters

Written by fe Bureau | Mumbai | Updated: Aug 27 2014, 09:54am hrs
In the three months to June 2014, the number of loss-making companies in the BSE 500 universe declined for the first time in seven quarters. Of a subset of 486 BSE 500 companies whose results were available, a total of 59 reported quarterly net loss in the period, the lowest reading since three months to June 2013.

While the biggest loss-makers comprise of capital-intensive or highly-leveraged companies, data shows that in the last one year bigger players from the power sector saw reduction in net losses.

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For instance, for energy majors Suzlon and Adani Power, that reported a net loss of R751 crore and R303 crore, respectively, in the June quarter, bottomline performance as such has improved in the last one year.

For the year ended June 2014, while latter has turned profitable with net earnings of R608.5 crore, net loss of Suzlon came down to R3,211 crore from R4,934 crore. At the end of FY14, net debt of these companies stood at R43,725 crore and R12,013 crore, respectively, and in the latest quarter, interest cost accounted for more than 40% of their net income.

In case of Suzlon, growing order book, sale of non-core assets worth R700 crore in FY14 and debt restructuring seems to have aided the financial performance. Although the analyst coverage on the stock is limited, certain positive policy measures announced in the union budget for the wind energy sector along with companys plan to further liquidate non-core assets worth R1,000 crore have sparked strong investor interest.

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The compensatory tariff of R1,000 crore attributed to FY14 helped Adani Powers earnings of the last one year.

However, the latest Supreme Court ruling that deemed all coal block allocations since 1993 illegal could have an adverse impact on its earnings if the compensation may have to be reversed.

The Supreme court verdict also has increased the risk to future earnings growth of Jindal Steel and Power that at R1,026 crore reported a moderate contraction in its net losses for the year ended June 2014.

Tata Power and Tata Tele Maharashtra also reported a contraction of 26% and 11%, respectively, in net losses for the year.

Meanwhile, a number of of mid-sized companies from infrastructure, aviation and sugar sectors have seen their losses widening.

As high expenses, including fuel and leasing costs, continue to eat into their topline, net losses of listed aviation players, Jet Airways and SpiceJet have jumped three and five times, respectively, in the last one year to R3,530 crore and R1,178 crore, respectively.

Even as they have ramped up asset sales efforts in order to improve their balance sheets, infra and construction players net losses of Lanco Infra, GMR Infra and IVRCL have widened by more than 70% in the last one year. These three companies collectively held net debt of R84,300 crore as of March 2014.