Electrosteel Castings has posted very good results for quarter ended 30th September 08 with total income touching at Rs.545.87 crores (Rs.317.48 crores for Sept. 07 quarter) with net profit placed at Rs.42.12 crores against Rs.28.89 crores for previous corresponding quarter. This is after providing for interest of Rs.39.64, which includes derivatives losses and foreign exchange difference on borrowings, against an income of Rs.7.09 crores, in the corresponding quarter of previous year. In the current quarter, deferred tax provisions were high at Rs.20.98 crores against Rs.1.09 crores of the Sept. 07 quarter.
Due to this, cash profit of the company for the quarter is at Rs.73.03 crores against Rs.38.77 crores for the corresponding quarter in previous year and Rs.77.18 crores for FY 08. This is without doing any adjustment for forex and derivative MTM provisions.
EPS for the quarter is placed at Rs.1.50 while cash EPS is at Rs.2.60.
The Board of the company proposes to issue 4.24 crores equity shares of Re.1 each, to two non-promoters overseas companies, at Rs.38 per share. Even promoters of the company have recently converted 6.25 lakh warrants into equity at Rs.43.80 per share, against the current price of share ruling at Rs.19. This is in the backdrop of the fact that promoters of Hindalco and Rajashree Sugars have not opted to convert or subscribe warrants due to fall in market price.
As on 30-09-08, the company had MTM loss of Rs.32.14 crores, arising out of foreign exchange contracts for hedging future exports against currency risks. Outstanding derivative contracts had MTM loss of Rs.19.81 crores as at 30-09-08. Though concern on these losses remains, but if the company has provided for it, and still has been able to post good growth in its bottomline, one should not take them with too much concerns.
Share having a book value of Rs.42 is now ruling at Rs.19 and FY 09 EPS is expected to be close to Rs.10 from its normal operations. Maybe, forex and derivative loses should get over by end of FY 09 and the company thereafter, should be able to post its normal operations.
Due to the concerns of forex and derivative losses, even good results have gone unnoticed. At Rs.19 share holds long term potential.
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