Videocon’s Q4 net profit fell 47% to . 86.4 crore as sales dipped 2%, operating margins contracted by 240 bps and interest cost rose 54% to . 299 crore. Its main business of consumer electronics and home appliances saw a 5% drop in revenues and 20% drop in profits. On the other hand, the oil & gas business, which contributes 12% to its turnover, performed well with a 20% jump in revenues and 23.6% growth in profits. Net profit for the year fell 8.4% to . 545.6 crore while sales rose 10% to . 12,919.5 crore. The company had nearly doubled its profit in 2006 to . 818.8 crore, but it has been stagnating ever since. The company has been having cash-flow problems with its debt mounting over the past few years. The company had a debt-equity ratio of 1.6 as of December 31, 2010. On a standalone basis, the ratio stood at 1.4 on June 30, 2011. The company spent nearly . 977.8 crore on interest cost in 2011 on a standalone basis. Since the telecom business and most of the petroleum exploration assets are held in subsidiaries, the consolidated debt and interest cost are bound to be higher.
The Supreme Court ruling to quash all 2G telecom licences issued after January 10, 2008 will hit the company hard, since all its 21 licences will be impacted by the order. However, a deal in the making in London is having a positive rub-off on Videocon. London-listed Cove Energy has attracted valuations above $1.6 billion, thanks to its 8.5% stake in Rovuma offshore block in Mozambique. Videocon holds 10% stake in the block through one of its wholly-owned subsidiaries. Going by Cove’s valuation, Videocon’s stake is worth over . 9,000 crore.
KEY POINTS Videocon’s Q4 net profit
fell 47% to . 86.4 crore as sales fell 2%
Consumer electronics and home appliances saw a 5% drop in revenues and 20% drop in profits
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