Wednesday, May 23, 2012


The dismal performance of the  Giants of Indian Industry has to do more with mismanagement of the government policies than the international crisis. Take any stalwart results of last financial year and guidance for the next tell the same story.

RIL has not been able to recover in last  two years partly because of over estimated reserves of their Gas recovery and partly because of the vindictive approach of MoPNG led by Jaipal Reddy. Refining margin is the only factor that can be attributed to market forces.
Adani Enterprises Ltd.  was looked upon as an alternate  promising and safe company to invest after RIL . However, the results have failed to fulfil that promise. AEL has posted a second straight fall in quarterly net profit due to  as its power business, which is suffering due to high fuel costs amid local shortages. Net profit of AEL for the fourth quarter through March slumped 67% to 3.09 billion, but revenue rose 17% to 106.37 billion. For the year ended March 31, Adani Enterprises's net profit fell to 18.39 billion from   24.76 billion.

Unless political will to reform power sector policy is shown by the central government power sector and Adani both are going to disappoint the investors for some more quarter. On fundamentals the business model of Adani Power is best amongst the best in Power Industry. APL has developed a total integrated business module, when ever the sector recovers this should be the front runner.

But as of the now, the story is no better than other peer companies.  The whole sector where more than   2,50,000 Cr of financial companies is invested, is transforming into NPA. Unless the politicians rise above the short sighted agenda this whole money would go into drain and the country will miss the opportunity to strengthen its infrastructure – a stepping stone for industrialization.

India is facing a coal shortage, estimated to be about 100 million tons for the current fiscal year, hurting growth of the power sector, which is mainly dependent on the dry fuel. Sluggish growth in output at state-run Coal India Ltd., which meets more than 80% of the country's coal requirement, has forced utilities to cut power generation despite an increase in costlier imported coal. Imported coal is at least 50% costlier than local coal.

The group's Adani Power Ltd.  earlier this month posted a second straight quarterly loss for the January-March period, at  2.90 billion. It has 4,620 megawatt of electricity generating capacity and aims to be a 10,000 MW company by the end of March 2013.

In its port business, the company expects annual cargo handling capacity to touch 200 million tons by 2020 from 77.75 million tons.  This will have the highest share in this segment.

Another promising investment Adani has done is in Australia. It has plans to start production from Australian mines in the year 2015.  The project handling capacity of Adani is such that this may happen even before the end of 2014.

The market cap of AEL has dropped to  ₹ 280 billion. The company touched its 52-week high Rs 765.95 and 52-week low Rs 228.50 on 26 Jul, 2011 and 16 May, 2012, respectively. Currently, it is trading -70.14% below its 52-week high and 0.09% above its 52-week low.

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