Adani Enterprises, the flagship firm of the Adani Group has posted its consolidated net profit to Rs 402.88 crore for the first quarter ended June 30, 2012. This is down by 29% on Y-o-Y basis . AEL had posted a net profit of Rs 569.81 crore in the Q1 last year.
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Reasons cited for the drop in profit were known and anticipated by the invetors. Market had already discounted the likely impact of Fuel cost to its power business. Till June AEL stock was traded in the range of 210-260, but it slipped to the current range of 171-196 in July. Going forward if there are no fresh shockers to the market, AEL share can bounce back to the previous range soon.
There are two reasons to this. First, in this quarter drop in profit has absorbed an increased cost of finance. It's finance cost in April-June quarter of 2011-12 was at Rs 222.97 crore. This quarter it rose to to Rs 927.19 crore. The impact was of more than Rs 700 cr. If this factor is ignored there is a 45% rise in the net profit. (402.88 + 704.22 - 281.69 = Rs 825.41 Cr).
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Environment and other regulatory clearances for its Australian coal venture will also be obtained by fiscal-end. The operations of overburden removal at Australian mine is expected to begin in November 2013.
Most bleeding of business plans has happened in power sector. Group Chairman Gautam Adani is optimist there. He said the company is working with concerned authorities to arrive at a solution and "are confident that our power business shall generate the envisaged return shortly, creating value for its stakeholders."
But, nothing will happen till the government is willing to take tough reforms in the power sector, which may not be liked by the managements of the DISCOMS. Unless that happens major break through in revival would be slow.
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