Rs 20,000-cr impairment charge could be biggest-ever by an Indian firm
Vedanta on Wednesday reported a Rs 18,718-crore loss for the fourth quarter of FY15 on account of a massive impairment charge at its oil and gas business arm, Cairn India, caused by a sharp fall in crude prices. The non-cash impairment charge of acquisition goodwill (about Rs 20,000 crore, or around $ 3 billion) is possibly the biggest such write-off by an Indian company ever. In May 2013, Tata Steel had announced a goodwill impairment charge of $1.6 billion on account of loss of value at its European and other overseas businesses.
The diversified resources company reported a net profit of Rs 3,074 crore in the same quarter of the previous financial year. For the full year 2014-15, Vedanta reported a loss of Rs 11,373 crore compared to a net profit of Rs 12,347 crore in 2013-14.
Tom Albanese, CEO, Vedanta, told reporters during a conference call that the exceptional item was a one-time impairment owing to the unprecedented fall in oil prices.
“Our Q4 results include a one-time non-cash impairment charge of acquisition goodwill, largely relating to the oil & gas business and the Sri Lanka Block on account of a steep fall in crude oil prices. This has no impact on the
production or future earnings capacity of these assets,” he said.
Albanese added that the company was regularly reviewing its human workforce across different businesses and will decide on job cuts based on what is necessary to remain competitive.
Operating income in Q4, at Rs 3,986 crore, was 36% lower sequentially and 40% year-on-year on account of lower commodity prices. This fall in operating income was due to a 50% fall in oil prices, higher exploration charges at Cairn India and a higher levy provision of 35% of royalty for District Mineral Foundation at Zinc India, the company said in a press release.
Operating income for the full year was Rs 22,226 crore, a decline of 13%, due to lower volumes, increased exploration costs, lower prices and higher profit petroleum in the oil & gas segment. Vedanta has interests across oil & gas, zinc, lead, silver, copper, iron ore, aluminium and commercial power.
Revenues in Q4 at Rs 17,732 crore were 7% lower sequentially and 15% lower year-on-year on account of a decline in oil and copper prices. For the full year, revenues were up 1% at Rs. 73,364 crore. The higher volumes at Copper India, aluminium ramp up at Korba, commissioning of Unit I at Talwandi Sabo Power (TSPL) and iron ore sales from Karnataka partially offset weaker commodity prices in the latter half of the year, the release said.
Albanese said mining activities in Goa were expected to resume in the latter half of 2015. “We have taken actions to maintain financial strength and flexibility during this period of weak commodity prices through capital re-phasing and cost management initiatives,” he added.
Vedanta reduced its gross debt by Rs 2,814 crore to Rs 77,752 crore as on March 31, 2015 from Rs 80,566 crore as on 31 March 2014. This was done through the retirement of loans from available cash balances. Finance cost for the year was 7% lower at Rs 5,659 crore partly due to cheaper refinancing of external loans, including FCCBs. Of the total loans of Rs 77,752 crore, rupee loans amounted to Rs 33,512 crore. The balance Rs 44,240 crore ewas in US dollars.