Cairn India: Good show; steady growth to come

MUMBAI: Cairn India's performance for the December '12 quarter was marginally better than expected as the company benefited from a depreciated rupee, while its production remained flat from the preceding quarter. The company has turned into a cash-rich one and is working to improve its output level steadily over next few quarters.

Cairn India's net profit for the quarter was Rs 3,345 crore, which was 48% higher against the year ago period. The main reason was 21% higher production at 205,014 barrels per day (bpd). Compared to the preceding quarter, when the production was almost flat, the company's profits are up 44%, mainly due to the weak rupee.

Ramping up production from the current level holds the key to improve the company's profitability. For this the company has plans to commence production from Aishwariya field by end of FY13. Similarly, it plans to apply Enhanced Oil Recovery (EOR) techniques to entire Mangala field from the Jun '13 quarter. Both these measures will help extend the plateau production.

With the current results the company's net profit for last 12 months stands at Rs 11,679 crore as against its valuation of Rs 65,000 crore, which translated in a price-to-earnings ratio of 5.6. Long-term investors are likely to find this attractive in view of the visibility on the company's future growth.