Cairn India - Existing investors exit between CMP and Rs 255 - Rs 270 band :: HDFC Securities

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Decline in average realization and higher tax out flow impacted top-line and bottom-line of the company Net Sales for Q3FY15, post profit sharing with the Government of India and the royalty expense in the Rajasthan block, was Rs 3,504 Cr ($565Mn) - down 12% Q-o-Q on account of lower realizations at $68.1/ boe, down 25%, due to the softer crude prices. This was partially offset by 13% higher volumes and 2% rupee depreciation on sequential basis. During the quarter, Reported profit after tax was Rs 1349.64 Cr ($218Mn).

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Quarterly Highlights 1. Revenue of Rs 3,504 Cr (US$ 565 Mn), EBITDA of RS2026.87Cr (US$ 33 Mn), well - low operating costs of $6 per barrel; Profit After Tax of Rs1,350Cr (US$ 218 Mn), Cash EPS of RS 10.72 2. Gross capex Rs 1,858 Cr (US$ 300 Mn) primarily in RJ asset development 3. Strong balance sheet with net cash of Rs 17,784 Cr (US$ 2,806 Mn) 4. Cairn India reported EBITDA of Rs.20.2 bn (-41% Y-o-Y, -22% Q-o-Q) led by modestly higher production volumes and better crude realizations due to lower discount to Dated Brent crude price. Reported net income at Rs.13.5 bn (-53% yoy, -41% qoq) was impacted by a sharp increase in DD&A expenses, higher exploration write-offs and higher effective tax rate. Gross production from the Rajasthan block increased 10% Q-o-Q to 180 kboe/d (-3% yoy); production was lower in Q2FY15 due to maintenance-related shutdown. 5. Profit petroleum in Q3FY15 stood at Rs.9.5bn (v/s Rs.12.8bn in Q3FY14 and Rs.11.3bn in Q2FY15). The current government share in DA1 is 40% and DA2 is 30%. Rajasthan royalty share stood at Rs.6.9bn (v/s Rs.11.1bn in Q3FY14 and Rs.9.1bn in Q2FY15). Other income stood at Rs.1.6bn (v/s Rs.1.4bn Q3FY14 and Rs.3.5bn in Q2FY15). Sharp Q-o-Q fall in other income is due to non-booking of mark-to-market gains on investments as per IFRS standards. Foreign exchange gain stood at Rs.3.5bn (v/s loss of Rs.1.3bn in Q3FY14 and gain of Rs.2.4bn in Q2FY15). Business 1. The company posted improved gross production of 20 mmbbls, on track to deliver FY15 guidance  Rajasthan production up 10% at 180k boepd; Aishwariya production continues to ramp-up  Production growth in offshore assets up 24%, primarily driven by operational interventions 2. Commencement of 3 major development Projects at Rajasthan including first polymer injection at Mangala field under the EOR program 3. The Ravva team continues to demonstrate the low risk, high value exploration potential within the block through the RE-6 discovery with estimated production of around 4,000 bopd

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