Analysts say losses a result of bad cost management

Adani Power’s losses widened in the quarter ended March. The company posted a consolidated net loss of Rs 586 crore for the quarter, against a net loss of Rs 292 crore in the corresponding period last year. It attributed the widening losses to the ongoing fuel crisis, as well as infrastructure bottlenecks.

For the year ended March, Adani Power’s consolidated net loss stood at Rs 2,295 crore, against a net loss of Rs 294 crore in 2011-12. Today, the stock ended at Rs 48.35 on the BSE, down 0.6 per cent compared to the previous close.

“The challenges of limited resources and evacuation bottlenecks affected our profitability in the past year. However, with the signing of the fuel supply agreement (FSA), the timely delivery of domestic coal and the fully-operationalised capacity, the company is confident of posing a strong operational and financial performance to bring value to its stakeholders,” said Chief Financial Officer Prabal Banerji.

This was the sixth consecutive quarter when the company recorded losses. Analysts said the sustained losses had resulted from bad cost management. “The reason for the fourth quarter losses isn’t convincing. The industry’s trend is in the other direction. In its recent results announcement, JSW Energy showed an improvement in costs. Internationally, too, coal prices have fallen in the past quarter,” said Daljeet Kohli, head of research, IndiaNivesh Research.

“It is not clear why the Adanis could not get the benefit of a long-term tie-up for international coal linkages. It could be the company wasn’t following the right strategy,” Kohli said. In a recent order, the Central Electricity Regulatory Commission (CERC) had ordered a committee be constituted to decide a compensation rate to offset the losses resulting from an increase in international coal prices and the unavailability of domestic coal for Adani Power’s 4,620-Mw imported coal-based project at Mundra. Adani Power Chairman Gautam Adani said, “We welcome the CERC order as a step forward to resolving the issue, as it would be in the best interests of all stakeholders and consumers.”

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