Jindal Steel and Power’s (JSPL) FY12 annual report analysis highlights improvement in cash flow from operations, but for short-term loans and advances which comprise ~14% of FY12 net worth (includes loans to promoter group entities). MTM forex loss was INR3.7bn (7% of FY12 PBT), of which INR3.3bn was capitalised under amended AS-11. Impairment of investments impacts profitability.
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Short-term loans and advances @14% of net worth
JSPL’s short-term loans and advances surged from INR15.4bn in FY11 to INR24.6bn in FY12, 13.6% of FY12 net worth (FY11: 10.9%), with interest income on ICDs increasing from INR428.1mn to INR992.3mn. Long term loans and advances include share application money of INR1.3bn in FY12 (FY11: INR0.5bn).
Exposure to group companies continues
Of the above loans and advances, amount given to promoter group companies was INR4.9bn in FY12 (FY11: INR4.6bn) with average yield at 8.3% in FY12 (FY11: 6.9%). Detailed party-wise break up is not available.
JSPL’s sale to promoter group companies jumped from INR9.5bn in FY11 to INR10.7bn in FY12 (5.9% of FY12 sales; FY11: 7.3%). Net receivables from promoter group companies increased from INR0.5bn in FY11 to INR1.2bn in FY12 (9.5% of FY12 debtors; FY11: 4.5%).
MTM forex loss @ 7% of PBT; majority capitalised
JSPL’s unhedged foreign currency outstanding loans/debts stood at INR22.5bn in FY12 (FY11: INR20.9bn). During FY12, its exchange loss stood at INR3.7bn (FY11: INR1.8bn), 7.1% of FY12 PBT (FY11: 3.6%), of which INR3.3bn (FY11: INR1.7bn) has been capitalised and balance has been charged through P&L. INR depreciation post FY12 (Yen ~12% and USD ~7%), may lead to further MTM forex losses.
Impairment of investments impacts profitability
During FY12, JSPL disposed of its diamond exploration business and recognised loss of INR0.9bn (1.8% of FY12 PBT; which is in addition to operating losses of INR735.8mn in earlier years). During Q1FY13, the company also made provision on its investment in Bolivia of INR5.7bn due to non-fulfillment of contractual obligations by Government of Bolivia.
The company increased its investment in Rockland Richfields from INR0.8bn in FY11 to INR1.5bn in FY12.
Regards,
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