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21 October 2015
2QFY16 Results Update | Sector: Oil & Gas
Cairn India
Harshad Borawake ([email protected]); +91 22 3982 5432 Rajat Agarwal ([email protected]); +91 22 3982 5558
BSE SENSEX S&P CNX CMP: INR154 Neutral 27,288 8,252
Bloomberg CAIR IN
Equity Shares (m) 1,874.9
M.Cap. (INR b) / (USD b) 288.7/4.4
52-Week Range (INR) 292 / 121 1, 6, 12 Rel. Per (%) 3/-26/-47 12M Avg Val (INR M) 580 Free float (%) 40.1
Financials & Valuation (INR Billion)
Y/E MAR 2015 2016E 2017E
Sales 146.5 97.0 113.8 EBITDA 96.2 46.4 58.0 Adj. PAT 69.5 20.1 21.5 Adj. EPS
23.9 13.7 11.5
EPS Gr. (%) -63.3 -42.6 -16.2 BV/Sh.(INR) 314.0 321.3 329.7 RoE (%) 12.0 4.3 3.5 RoCE (%) 12.2 4.0 4.9 Payout (%) 28.4 24.6 24.6 Valuations P/E (x) 4.2 11.2 13.4 P/BV (x) 0.5 0.5 0.5 EV/EBITDA(x) 1.5 3.2 2.1 Div. Yield (%) 5.8 1.9 1.6
Estimate change
TP change
Rating change
EBITDA in line; stock trading at a premium to proposed merger ratio EBITDA in line: Cairn India reported largely in-line EBITDA at INR9.8b (-65% YoY, -
29% QoQ). However, PAT was above est. at INR6.7b led by deferred tax credit (effective tax negative) of INR1.8b and higher-than-expected forex gain of INR3.8b (est. INR2.2b; +109% QoQ, +58% YoY).
2QFY16 revenue stood at INR22.4b (inline; -44% YoY, -15% QoQ). Impact of lower than expected Rajasthan production (2% lower) and net realization (discount to Brent at 14.3% vs est of 11%) was neutralized by lower profit petroleum.
Rajasthan 2QFY16 production averaged 168kbpd (-2% QoQ): Rajasthan production declined to average 168kbpd (-6% YoY, -1% QoQ), led by natural decline in core fields. The management maintained its flat production guidance for FY16; it had earlier indicated that the growth is contingent on oil price increase.
Rajasthan realization at USD43.3/bbl implies 14.3% discount to Brent (v/s 9.9% in 1QFY16). The management expects production contribution from Mangala IOR/EOR from 4QFY16.
Focusing on cost savings: Crude price fall has led to capital cost reduction by ~15% and increased operational efficiency, reduction of opex/boe to USD5.5/boe from USD 5.8/boe in FY15.
Valuation and view DCF value of Cairn is INR192/sh (WACC: 12%; including cash per share of
INR116/sh) at long-term Brent of USD65/bbl. However, the value of Cairn on the proposed merger with Vedanta at swap ratio of 1:1 (plus one INR10 RPS— redeemable preference share) works out to INR100.
Cairn’s stock price performance has diverged from the proposed swap ratio (adjusted for RPS) Since the beginning of July, which implies an expectation of more favorable swap ratio for Cairn shareholders due to lower risk profile of balance sheet (high cash balance). Cairn is trading at a premium of INR50-70/sh rather than a premium of INR10/sh as per the proposed merger.
Our target price implies an upside of 25%, but there remains a downside risk as current commodity prices are ~20% lower than our long term crude price assumptions. The stock trades at 13.4x FY17E EPS of INR11.5. Neutral.
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
21 October 2015 2
Cairn India
Exhibit 1: Cairn India: Operating Performance FY14 FY15 FY16 2QFY16 (%)
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q YoY QoQ Gross oil production (kbpd)
Ravva 21.9 22.6 21.9 18.8 19.5 20.5 23.4 26.9 25.2 22.5 9.8 (10.9) Cambay 8.6 6.8 8.2 7.3 8.4 8.4 8.9 8.5 7.8 9.6 14.7 23.2 Rajasthan 172.8 175.5 186.4 190.9 183.2 163.3 180.0 174.0 172.2 168.1 3.0 (2.4) Sub-total 203.3 205.0 216.5 217.1 211.1 192.1 212.3 209.3 205.2 200.2 4.2 (2.4) Gross gas production (mmscmd)
Ravva 1.1 1.1 1.0 0.9 0.7 0.0 0.7 0.8 0.6 0.6 2,049 8 Cambay 0.4 0.3 0.3 0.3 0.4 0.4 0.4 0.2 0.2 0.3 (31.3) 35.0 Rajasthan 0.1 0.1 0.1 0.3 0.2 0.2 0.2 0.3 0.3 0.3 12.5 0.0 Sub-total 1.6 1.4 1.4 1.3 1.2 0.4 1.1 1.0 0.8 0.9 110.4 14.9 Gross total (kboepd) 211.8 213.3 224.5 224.4 217.9 194.5 218.9 215.3 209.7 205.4 5.6 (2.1)
Net oil production (kbpd)
Ravva (22.5%) 4.9 5.1 4.9 4.2 4.4 4.6 5.3 6.0 5.7 5.1 9.8 (10.9) Cambay (40%) 3.4 2.7 3.3 2.9 3.4 3.4 3.6 3.4 3.1 3.8 14.7 23.2 Rajasthan (70%) 121.0 122.8 130.5 133.6 128.2 114.3 126.0 121.8 120.5 117.7 3.0 (2.4) Sub-total 129.3 130.7 138.7 140.8 136.0 122.2 134.8 131.2 129.3 126.6 3.6 (2.1) Net gas production (mmscmd)
Ravva (22.5%) 0.2 0.2 0.2 0.2 0.2 0.0 0.2 0.2 0.1 0.1 2,049 8 Cambay (40%) 0.1 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.1 0.1 (31.3) 35.0 Rajasthan (70%) 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 12.5 0.0 Sub-total 0.5 0.5 0.4 0.3 0.3 0.2 0.3 0.3 0.2 0.2 50.8 18.3
Net oil + gas production (kboepd)
Ravva (22.5%) 6.4 6.6 6.3 5.5 5.4 4.6 6.3 7.1 6.4 5.9 26.5 (8.7) Cambay (40%) 4.3 3.5 4.1 3.7 4.3 4.3 4.4 3.8 3.6 4.5 4.9 24.7 Rajasthan (70%) 121.5 123.8 131.5 134.8 129.3 114.3 126.0 121.8 120.5 117.7 3.0 (2.4) Net Total (kboepd) 132.1 133.8 141.9 144.0 139.0 123.2 136.7 132.8 130.5 128.0 3.9 (1.9)
Key Operating Metrics
Fx rate (INR/USD) 55.9 62.5 62.0 62.0 59.8 60.5 61.8 62.2 63.7 65.0 7.4 2.0 Brent (USD/bbl) 102.8 110.6 109.2 107.7 109.7 102.0 76.0 55.2 61.9 50.5 (50.5) (18.4) Rajasthan realization (USD/bbl) 94.3 96.0 95.6 95.2 97.5 91.5 68.3 48.6 55.8 43.3 (52.7) (22.4) Disc. to Brent (%) (8.3) (13.2) (12.5) (11.6) (11.1) (10.3) (10.8) (12.0) (9.9) (14.3) 38.9 45.1 Natural gas (USD/mmbtu) 4.8 5.7 5.7 5.9 5.4 7.1 6.1 6.0 6.4 6.8 (4.1) 6.1 Average realization (USD/boe) 93.3 95.3 94.9 94.4 93.3 95.3 68.1 48.4 56.0 43.7 (54.1) (22.0) Average realisation (INR/boe) 5,215 5,956 5,884 5,853 5,577 5,766 4,209 3,010 3,567 2,841 (50.7) (20.4)
Source: Company, MOSL
21 October 2015 3
Cairn India
Exhibit 2: CAIRN quarterly P&L (INR b)
FY14 FY15
FY16 2QFY16 (%)
INR B 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q YoY QoQ Gross revenues 59.9 69.8 73.9 73.5 73.3 60.2 51.5 35.4 41.3 32.3 (46.4) (21.8) Less: Profit Petroleum 10.5 12.4 12.8 12.0 17.8 11.3 9.5 4.0 9.0 5.4 (52.7) (40.4) Less: Levies (Cess + Royalty) 15.9 18.3 18.9 17.8 18.0 15.6 14.2 11.5 12.9 11.3 (28.0) (12.7) Net Revenues 33.5 39.2 42.3 43.7 37.5 33.3 27.8 19.9 19.4 15.6 (53.0) (19.2) Less: Opex 3.4 3.9 5.3 5.2 4.5 5.4 5.9 6.5 5.6 5.9 9.1 3.9 EBITDA 30.1 35.3 36.9 38.4 33.1 27.9 21.8 13.4 13.7 9.8 (64.9) (28.7) Less: Exploration w/off 1.0 0.5 1.0 1.6 2.5 1.3 1.6 5.5 0.8 0.7 (49.1) (17.3)
Less: D,D&A 5.2 5.5 5.9 6.4 7.2 7.0 8.9 2.6 8.8 8.6 23.0 (1.4) EBIT 23.9 29.3 30.0 30.5 23.3 19.5 11.4 5.3 4.1 0.5 (97.6) (88.8) Less: Interest 0.1 0.1 0.1 0.1 0.0 0.1 0.1 0.1 0.0 0.1 12.7 256.2 Add: Other Income 1.3 1.1 1.4 4.1 4.2 3.5 1.6 3.6 3.8 1.2 (65.2) (68.4) PBT prior to FX fluctuations 25.1 30.3 31.3 34.4 27.5 22.9 12.9 8.8 7.9 1.6 (93.0) (79.7) Forex gain / (loss) 6.8 4.3 (1.3) (2.4) 1.0 2.4 3.5 (1.7) 1.8 3.8 58.5 n.a. Exceptionals (16.3) (5.1) 0.0 0.0 n.a. n.a. PBT 31.9 34.6 30.0 32.0 12.2 25.3 16.4 2.1 9.8 5.4 (78.6) (44.5) Tax 0.6 0.8 1.2 1.6 1.3 2.6 2.9 4.5 1.4 (1.3) (151.2) (193.1) Tax rate adj. for forex & exceptionals (%) 2.4 2.6 3.7 4.8 4.7 11.2 22.8 51.1 17.7 (81.4)
PAT 31.3 33.9 28.8 30.4 10.9 22.8 13.5 (2.4) 8.3 6.7 (70.5) n.a. Adj. PAT 31.3 33.9 28.8 30.4 27.2 22.8 13.5 6.1 8.3 6.7 (70.5) (19.4) Adj. EPS 16.7 18.1 15.4 16.2 5.8 12.1 7.2 (1.3) 4.5 3.6 (70.5) n.a.
Source: Company, MOSL
Exhibit 3: CAIRN quarterly P&L (USD/bbl)
FY14 FY15 FY16 2QFY16 (%) USD/bbl 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q YoY QoQ Gross revenues 89.1 90.8 91.3 91.5 97.0 87.8 66.2 47.6 54.5 42.1 (52.0) (22.7) Less: Profit Petroleum 15.7 16.1 15.8 14.9 23.5 16.5 12.2 5.4 11.9 7.0 (57.6) (41.1) Less: Levies (Cess + Royalty) 23.6 23.8 23.3 22.2 23.8 22.8 18.3 15.5 17.1 14.7 (35.5) (13.7) Net Revenues 49.8 51.0 52.2 54.3 49.7 48.5 35.7 26.8 25.6 20.4 (57.9) (20.1) Less: Opex 5.1 5.0 6.6 6.5 5.9 7.8 7.6 8.8 7.4 7.6 (2.3) 2.7 EBITDA 44.8 45.9 45.6 47.8 43.8 40.7 28.1 18.0 18.1 12.8 (68.6) (29.5) Less: Exploration w/off 1.5 0.7 1.2 2.0 3.4 2.0 2.0 7.4 1.1 0.9 (54.4) (18.2) Less: D,D&A 7.7 7.1 7.4 7.9 9.5 10.3 11.5 3.4 11.6 11.3 10.1 (2.5) EBIT 35.6 38.2 37.0 37.9 30.9 28.5 14.6 7.2 5.5 0.6 (97.9) (88.9) Less: Interest 0.2 0.1 0.1 0.1 0.0 0.1 0.1 0.1 0.0 0.1 0.9 252.1 Add: Other Income 1.9 1.4 1.7 5.1 5.5 5.0 2.1 4.8 5.0 1.6 (68.8) (68.8) PBT prior to FX fluctuations 37.3 39.4 38.7 42.9 36.4 33.5 16.6 11.9 10.5 2.1 (93.7) (80.0) Forex gain / (loss) 10.1 5.6 (1.6) (3.0) 1.3 3.5 4.5 (2.3) 2.4 5.0 41.9 106.8 Exceptionals - - - - (21.5) 0.0 0.0 (6.8) 0.0 0.0 n.a. n.a. PBT 47.4 45.0 37.1 39.8 16.2 37.0 21.2 2.8 12.9 7.1 (80.9) (45.1) Tax 0.9 1.0 1.4 2.0 1.7 3.7 3.8 6.1 1.9 (1.7) (145.8) (192.0) PAT 46.5 44.0 35.6 37.8 14.5 33.2 17.4 (3.2) 11.0 8.8 (73.6) (20.4) Adj. PAT 46.5 44.0 35.6 37.8 36.0 33.2 17.4 8.1 11.0 8.8 (73.6) (20.4)
Source: Company, MOSL
21 October 2015 4
Cairn India
Exhibit 4: Rajasthan Gross Production averaged 168kbpd, down 2% QoQ
Source: Company, MOSL
Exhibit 5: CAIRN Net O+G Production down QoQ led by Rajasthan (kboepd)
Source: Company, MOSL
Exhibit 6: Updates on key development projects at Rajasthan field
Source: Company, MOSL
6.0
15.
4
17.
5
44.
7
116
.1
124
.9
118
.0
125
.1
125
.3
125
.1
137
.6
167
.1
171
.8
170
.0
168
.6
172
.8
175
.5
186
.4
190
.9
183
.2
163
.3
180
.0
174
.0
172
.2
168
.1
2QFY
10
3QFY
10
4QFY
10
1QFY
11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
2QFY
15
3QFY
15
4QFY
15
1QFY
16
2QFY
16
4 11 12 31
81 87 83 88 88 88 96 117 120 119 118 122 124 131 135 129
114 126 122 121 118
19 25 26 45
94 100 94 100 99 99 107
127 129 128 127 132 134 142 144 139
123 137 133 131 128
2QFY
10
3QFY
10
4QFY
10
1QFY
11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
2QFY
15
3QFY
15
4QFY
15
1QFY
16
2QFY
16
Ravva (22.5%) Cambay (40%) Rajasthan (70%) Net Total (kboepd)
21 October 2015 5
Cairn India
Rajasthan discount to Brent at ~14.3% The discount to Brent was highest ever and management indicated that it was
led by oversupply of heavy crudes. Lower cracks for bottom of barrel products led to higher demand of light crudes.
Rajasthan realization stood at ~USD43.3/bbl (-53% YoY, -22% QoQ), implying discount to Brent at ~14.3% (v/s 9.9% in 1QFY16).
Cairn continues to guide Rajasthan realization discount to Brent between 8-13%.
Exhibit 7: Rajasthan discount to Brent at 14.3% in 2QFY16 v/s 9.9% in 1QFY16
Source: Company, MOSL
Exhibit 8: Update on Cairn’s Key Exploration blocks
No. Exploration Blocks 1QFY16 update 2QFY16 update 1 KG-ON-2003/1 block
(Cairn: 49%) - Submitted FDP to the Management Committee for approval in 1QFY16
- Same as before
2 KG-OSN-2009/3 block (Cairn: 100%)
- Well site surveys commenced and completed in Q1FY16. - Additional 2D seismic data acquired and PSDM seismic data interpretation ongoing. - Expect drilling in 1HFY16.
- Preliminary depth migrated preliminary seismic data have been interpreted - Expect drilling in Q3FY17.
3 MB-DWN-2009/1 block (Cairn: 100%)
- Regional work continuing with options for acquisition of 3D seismic data under consideration pending the outcomes of the 2D interpretation
- Regional prospectivity analysis completed along with interpretation of new data - Assessment of implications on prospects and future exploration program underway
4 PR-OSN-2004/1 block (Cairn: 35%)
- In Q1FY16, continued prospect evaluation and optimization drilling locations to be ready for the FY16 work program.
- In Q2FY16, continued prospect evaluation and optimization of drilling locations
5 Srilanka Block SL 2007-01-001 (Cairn: 100%)
- Submitted the closure documents to Petroleum Resources Development Secretariat (PRDS) - Under review, expected closure in October 2015.
6 South Africa Block 1 (Cairn: 60%)
- Robust portfolio of prospects generated and two drillable prospects matured during Q1FY16.
- Prospects being evaluated
Source: Company, MOSL
Other key highlights Profit petroleum in 2QFY16 stood at INR5.4b (v/s INR11.3b in 2QFY15 and INR9b
in 1QFY16). Rajasthan royalty share stood at INR4.3b (v/s INR9b in 2QFY15 and INR6b in
1QFY16).
4%
6%
8%
10%
12%
14%
16% 1Q
FY11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
2QFY
15
3QFY
15
4QFY
15
1QFY
16
2QFY
16
21 October 2015 6
Cairn India
Other income stood at INR1.2b (v/s INR3.5b 2QFY15 and INR3.8b in 1QFY16) impacted by mark to market loss of USD20m on bonds and lower interest recognition led by timing difference.
Foreign exchange gain stood at INR3.8b (v/s gain of INR1.8b in 1QFY16 and gain of INR2.4b in 2QFY15).
Valuation and view Cairn India production growth potential and reserve upgrades is contingent on
the higher oil price from current levels (~USD50.5/bbl). We await clarity on any change in the reserve number.
Operational updates to watch out are (1) Rajasthan production trend, (2) Updates on reserves and (3) Update on other exploration blocks and (4) clarity on Rajasthan PSC extension.
DCF value of Cairn is INR192/sh (WACC: 12%; including cash per share of INR116/sh) at long-term Brent of USD65/bbl. However, the value of Cairn on the proposed merger with Vedanta at swap ratio of 1:1 (plus one INR10 RPS— redeemable preference share) works out to INR100.
Cairn’s stock price performance has diverged from the proposed swap ratio (adjusted for RPS) Since the beginning of July, which implies an expectation of more favorable swap ratio for Cairn shareholders due to lower risk profile of balance sheet (high cash balance). Cairn is trading at a premium of INR50-70/sh rather than a premium of INR10/sh as per the proposed merger.
Our target price implies an upside of 25%, but there remains a downside risk as current commodity prices are ~20% lower than our long term crude price assumptions.
The stock trades at 13.4x FY17E EPS of INR11.5. Neutral.
Exhibit 9: Cairn India: Key Assumptions Y End: March 31 FY11 FY12 FY13 FY14 FY15E FY16E FY17E Exchange Rate (USD/INR) 45.6 47.9 54.5 60.6 61.1 65.2 67.0 Brent Crude Price (USD/bbl) 86.7 114.5 110.5 107.6 85.7 54.4 60.0 Disc. for Rajasthan Crude (USD/bbl) 12.0% 9.4% 11.0% 11.4% 12.3% 12.3% 11.0% Rajasthan net realization (USD/bbl) 76.3 103.7 98.3 95.3 75.2 47.7 53.4
Source: Company, MOSL
21 October 2015 7
Cairn India
Story in charts
Exhibit 10: Well diversified portfolio with assets ranging from exportation to production as well as 2 overseas assets
Source: Company, MOSL
Exhibit 11: Cairn’s pipeline gives access to majority of domestic refineries as well as export option
Source: Company, MOSL
Exhibit 12: Cairn has continually upgraded in-place resource base
Source: Company, MOSL
Exhibit 13: …as well as estimated ultimate recovery (mmboe)
Source: Company, MOSL
21 October 2015 8
Cairn India
Exhibit 14: …however Mangala decline, slower Bhagyam ramp-up, halted Rajasthan production ramp-up in FY15
Source: Company, MOSL
Exhibit 15: Management vision to produce 300kbpd at Rajasthan
Source: Company, MOSL
Exhibit 16: Cairn’s Rajasthan block has reported 38 discoveries till date
Source: Company, MOSL
Exhibit 17: Cairn stock trading at a premium to Vedanta since June-15 (INR/sh)
Source: Company, MOSL
Exhibit 18: Cairn guides for Rajasthan realization discount at 8-13% to Brent crude price; 2QF16 could be aberration (USD/bbl)
Source: Company, MOSL
Exhibit 19: 1 Yr Fwd Cairn India P/B Chart
Source: Company, MOSL
99
128
170 181 175 172 177 190
FY11 FY12 FY13 FY14 FY15E FY16E FY17E FY18E
99 128
170 181 175 172 177 190
300
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 ……
1 0 1 2 4 4 6 4 2 1 0 0 0 0 5 7 1
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Gud
a Raag
eshw
ari
Man
gala
Bhag
yam
(15) (10)
(5) - 5
10 15 20 25 30
1-Ju
n-15
3-
Jun-
15
5-Ju
n-15
9-
Jun-
15
11-J
un-1
5 15
-Jun
-15
17-J
un-1
5 19
-Jun
-15
23-J
un-1
5 25
-Jun
-15
29-J
un-1
5 1-
Jul-1
5 3-
Jul-1
5 7-
Jul-1
5 9-
Jul-1
5 13
-Jul
-15
15-J
ul-1
5 17
-Jul
-15
21-J
ul-1
5
13.4
64.3
14.7
4.2 0
10 20 30 40 50 60 70
Mar
-08
Dec
-08
Aug-
09
Apr-
10
Dec
-10
Sep-
11
May
-12
Jan-
13
Sep-
13
May
-14
Feb-
15
Oct
-15
PE (x) Peak(x) Avg(x) Min(x)
21 October 2015 9
Cairn India
Financials and valuations
Income Statement (INR Million) Y/E March 2011 2012 2013 2014 2015 2016E 2017E
Net Sales 102,779 131,130 175,241 187,617 146,462 97,028 113,766
Change (%) 533.3 27.6 33.6 7.1 -21.9 -33.8 17.3
Change in Stock -264 -263 -274 -141 -11 -302 0
Employee Costs 1,105 861 1,033 2,741 1,105 1,270 1,461
Operating Costs 16,709 22,475 39,603 44,233 49,162 49,618 54,272
EBITDA 85,228 108,056 134,880 140,784 96,207 46,442 58,032
% of Net Sales 82.9 82.4 77.0 75.0 65.7 47.9 51.0
D,D&A (incl. w/off) -13,596 -17,391 -23,008 -27,098 -36,675 -35,426 -42,420
Interest -2,909 -2,220 -687 -415 -204 -104 -99
Other Income 1,288 3,194 7,228 7,834 12,849 13,317 15,208
EBIT 70,011 91,639 118,414 121,106 72,177 24,230 30,722
Forex Fluctuations -1,112 6,148 3,134 7,390 5,244 5,627 0
Exceptional Item 0 -13,552 1,888 0 -21,326 0 0
PBT 68,899 84,235 123,436 128,496 56,095 29,856 30,722
Tax 5,556 4,857 2,351 4,178 11,299 4,158 9,184
Rate (%) 7.9 5.3 2.0 3.4 15.7 17.2 29.9
PAT 63,343 79,378 121,085 124,318 44,796 20,071 21,537
Adjusted PAT 63,343 92,929 119,198 124,318 69,531 20,071 21,537
Change (%) 502.6 46.7 28.3 4.3 -44.1 -71.1 7.3
Balance Sheet (INR Million)
Y/E March 2011 2012 2013 2014 2015 2016E 2017E
Share Capital 19,019 19,074 19,102 19,076 18,749 18,749 18,749
Reserves & Surplus 383,913 463,847 457,892 555,301 569,954 583,697 599,469
Net Worth 402,932 482,921 476,994 574,377 588,702 602,446 618,217
Total Loans 26,782 0 0 0 0 0 0
Deferred Tax 5,750 6,841 4,641 7,356 12,718 13,203 13,817
Capital Employed 435,465 489,762 481,635 581,733 601,420 615,648 632,035
Net Fixed Assets 59,236 59,294 60,645 60,193 59,212 71,325 79,651
Prod. Proper.(net of depletion) 20,850 30,207 33,366 38,644 25,336 14,478 4,961
Capital WIP 39,819 45,002 43,850 56,969 59,067 56,188 47,943
Goodwill 253,193 253,193 151,889 151,922 151,784 151,784 151,784
Investments 10,945 18,356 103,823 163,638 152,334 152,334 152,334
Curr. Assets, L & Adv.
Inventory 3,277 8,268 6,420 2,971 3,439 6,646 7,792
Debtors 14,829 14,968 22,852 25,124 11,250 14,621 17,143
Cash & Bank Balance 44,847 70,135 55,568 17,619 8,517 808 27,273
Loans & Adv. and Other CA 16,655 35,010 61,600 139,829 197,405 197,405 197,405
Current Liab. & Prov.
Liabilities 12,638 24,828 17,399 27,166 40,180 22,307 26,156
Provisions 16,628 19,946 40,978 48,009 26,743 27,633 28,095
Net Current Assets 50,342 83,608 88,063 110,367 153,688 169,539 195,362
Application of Funds 435,465 489,762 481,635 581,733 601,420 615,648 632,035
E: MOSL Estimates
21 October 2015 10
Cairn India
Financials and valuations
Ratios
Y/E March 2011 2012 2013 2014 2015 2016E 2017E Basic (INR)
EPS 33.3 41.6 63.1 65.2 23.9 13.7 11.5 Adjusted EPS 33.3 48.7 63.1 65.2 37.1 13.7 11.5 Cash EPS 39.6 49.2 72.8 77.2 37.6 31.1 29.7 Book Value 211.9 253.2 249.7 301.1 314.0 321.3 329.7 Adj. Book Value 78.7 120.4 170.2 221.5 233.0 240.4 248.8 DPS 0.0 0.0 11.5 12.5 9.0 2.9 2.4 Payout (incl. Div. Tax.) 0.0 0.0 21.2 22.1 28.4 24.6 24.6
Valuation (x)
P/E
2.4 4.2 11.2 13.4
Cash P/E
2.0 4.1 5.0 5.2 EV / EBITDA
0.9 1.5 3.2 2.1
EV / BOE (in USD, 1P basis)
3.2 3.7 3.7 3.0 Price / Book Value
0.5 0.5 0.5 0.5
Dividend Yield (%)
8.1 5.8 1.9 1.6
Profitability Ratios (%)
RoE 17.1 21.0 24.8 23.6 12.0 4.3 3.5 RoCE 17.9 20.3 24.5 22.9 12.2 4.0 4.9
Turnover Ratios
Debtors (No. of Days) 32 41.5 39.4 46.7 45.3 55.0 55.0 Fixed Asset Turnover (x) 1.5 1.8 2.1 2.1 1.1 0.6 0.6
Leverage Ratio
Net Debt / Equity (x) -0.1 -0.2 -0.3 -0.3 -0.3 -0.2 -0.3
Cash Flow Statement (INR Million) Y/E March 2011 2012 2013 2014 2015 2016E 2017E Profit /(Loss) before Tax 68,900 84,235 121,548 128,496 51,091 29,856 30,722 Depreciation 12,226 14,709 18,873 23,545 47,545 32,547 34,174 Other op activities 4,935 -6,915 -1,448 -773 1,501 261 4,292 Direct Taxes Paid -12,592 -21,291 -22,687 -26,227 -10,873 -3,674 -8,570 (Inc)/Dec in Wkg. Capital -10,088 -29 -5,730 -14,113 5,938 -23,560 642 CF from Op. Activity 63,381 70,710 110,556 110,928 95,202 35,431 61,260 (Inc)/Dec in FA & CWIP -25,648 -29,558 -16,313 -28,733 -55,744 -31,982 -32,982 Free Cash Flow 37,733 41,152 94,243 82,195 39,458 3,449 28,278 Related party loan
-77,425
(Pur)/Sale of Investments -24,438 -196 -117,506 -55,700 68,298 0 0 Interest & dvd received 903 2,449 3,238 3,142 5,458 2,617 3,954 CF from Inv. Activity -49,183 -27,306 -130,581 -81,291 -59,414 -29,365 -29,029 Change in Equity 670 566 589 -945 -11,071 0 0 Inc / (Dec) in Debt -7,348 -14,419 -12,500 0 -47 0 0 Other fin, activities -2,052 -1,363 -968 -358 -121 0 0 Dividends Paid 0 0 -11,098 -27,939 -23,094 -11,954 -5,765 CF from Fin. Activity -8,730 -15,216 -23,977 -29,242 -34,334 -11,954 -5,765 Inc / ( Dec) in Cash 5,468 28,188 -44,002 395 1,455 -5,889 26,466 Add: Opening Balance 6,223 11,467 44,463 463 833 2,270 808 Closing Balance b/f deposit 11,691 39,656 462 858 2,288 -3,619 27,273 Bank deposit 33,156 30,480 55,106 16,762 6,229 4,426 Closing Balance 44,847 70,135 55,568 17,619 8,517 808 27,273
E: MOSL Estimates
21 October 2015 11
Cairn India
Corporate profile
Exhibit 23: Shareholding pattern (%) Jun-15 Mar-15 Jun-14
Promoter 59.9 59.9 59.9
DII 10.5 10.4 9.7
FII 13.5 14.3 16.9
Others 16.2 15.5 13.5
Note: FII Includes depository receipts
Exhibit 24: Top holders Holder Name % Holding
Cairn UK Holdings Ltd 9.8
LIC of India 9.1
Exhibit 25: Top management Name Designation
Navin Agarwal Chairman
Mayank Ashar Managing Director & CEO
Sudhir Mathur CFO
Mike Yeager Chairman, Operations Review Board
Darran Lucas Director, Exploration
Exhibit 26: Board of director Name Name
Navin Agarwal Edward T Story*
Mayank Ashar Naresh Chandra*
Aman Mehta* Tarun Jain
Omkar Goswami* Priya Agarwal
*Independent
Exhibit 27: Auditors
Name Type
S R Batliboi & Associates LLP Statutory
Shome & Banerjee Cost Auditor
Exhibit 28: MOSL forecast v/s consensus EPS
(INR) MOSL
forecast Consensus
forecast Variation
(%)
FY16 13.7 19.3 -29.1
FY17 11.5 19.1 -39.9
Company description Cairn India, an E&P company, listed in January 2007 through an IPO after it spun off from its parent Cairn Energy Plc. Cairn Energy sold its majority stake to Vedanta group making it a parent with ~60% stake. Cairn has working interest in 9 E&P blocks. Ravva and Cambay blocks produce about 34kboepd (Cairn WI 9.2kbpd). The Rajasthan block, which accounts for ~80% of Cairn’s reserves, produced at ~191kbpd (Cairn WI ~ 134kbpd) in 4QFY14.
Exhibit 20: Sensex rebased
21 October 2015 12
Cairn India
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