Tycoon Agarwal’s Vedanta Beats All Estimates on Tax Gain

(Bloomberg) -- Vedanta Ltd. reported a 61% jump in quarterly profit as a one-time tax benefit countered lower metal prices and slowing demand.

• Net income advanced to 21.58 billion rupees ($300 million) in the three months to September from 13.43 billion rupees a year earlier, the Anil Agarwal-owned company said in a statement Thursday. That beat the 6.87 billion rupee average analyst estimate. Sales declined 3% to 217.4 billion rupees.

Key Insights

• Prices of most commodities produced by Vedanta such as zinc, aluminum, copper and crude oil were lower during the quarter. The slowest growth in India in six years also weighed on sales and margins of domestic metal makers, including rival Hindalco Industries Ltd., which earlier this week posted a 33% slump in profits.
• The company saw a tax gain of 16.1 billion rupees compared with an expense of 7.18 billion rupees during the same period a year earlier.
  • Tax gains lifted quarterly net income by 15% at unit Hindustan Zinc Ltd., which contributed more than half of Vedanta’s profit in the year ended March.
• Vedanta’s earnings were boosted by higher volumes at its Gamsberg zinc mine in South Africa, lower costs at its aluminum unit and increased sales of iron ore in Karnataka.

Market Reaction

• Shares of Vedanta fell 3% in Mumbai. The stock has lost more than a quarter of its value this year.
• Analysts have 10 buy recommendations on the company, 11 holds and 1 sell, according to data compiled by Bloomberg.

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• Net debt reduced by 83.2 billion rupees during the second quarter and stood at 200.8 billion rupees as of Sept. 30.
• The company recognized 25.01 billion rupees of deferred tax credits in the quarter, benefiting from the government’s cutting of the corporate tax rate in September.
• Vedanta revised lower its capital expenditure guidance for the year ending March to 80 billion rupees to 85 billion rupees from 100 billion rupees earmarked in April, Chief Financial Officer Arun Kumar G.R. said during a post-earnings media call. The company has already spent 30 billion rupees from April through September.
• The second half of the year will be better for Vedanta as metal prices are expected to improve in the coming quarters and “we are already seeing signs of it,” Chief Executive Officer Srinivasan Venkatakrishnan said during the same call.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net

To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Alpana Sarma, Abhay Singh

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