Essar Oil Ltd. (ESOIL), the operator of India’s second-biggest non-state refinery, posted a loss for the third straight quarter after earnings from turning crude into fuels declined.
The loss was 5.15 billion rupees ($96 million) in the three months ended March 31, compared with a 3.2 billion rupee profit a year earlier, the company said in a regulatory filing today. The median of seven analyst estimates compiled by Bloomberg was a loss of 1 billion rupees.
The company, controlled by billionaire brothers Shashi and Ravi Ruia, increased the capacity and complexity of its refinery, betting the investment will help lift margins because it will be able to process heavier crude that’s typically cheaper than lighter oils. Reliance Industries Ltd., owner of the world’s largest oil-refining complex, reported the sharpest decline in quarterly profit in more than three years after margins narrowed as global economic growth slowed.
Essar Oil gained 2.7 percent to 51.85 rupees in Mumbai yesterday. The stock has climbed 3.1 percent this year, compared with a 5.4 percent increase in the benchmark Sensitive Index.
The company’s refining margin in the quarter was $4.60 a barrel, compared with $5.29 a barrel a year earlier, according to the statement.
Essar Oil plans to sell shares and borrow from banks to raise about $1.4 billion to refinance loans and comply with a court verdict to pay tax on fuel sales, Chief Executive Officer Lalit Kumar Gupta said in an interview on April 16. The refiner set aside 40.2 billion rupees in the quarter ended Dec. 31 as a “prudent measure” for the sales tax payment.
The Supreme Court on Jan. 17 said the company isn’t entitled to defer payment of sales tax, an incentive offered by the Gujarat state government for the refinery at Vadinar to start production by Aug. 15, 2003. The deadline was missed.
The company completed an 83 billion rupee expansion of the Vadinar refinery in March and plans to increase its annual capacity to 20 million metric tons by September from 18 million tons currently. The refiner may buy as much as 10 million tons of crude from countries including Venezuela, Colombia, Mexico, Brazil and Ecuador, Gupta said in the interview.
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