Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Stocks

Suzlon Earnings Fall 92% but reported as an actual gain

Economic Times reports:

Suzlon Energy Ltd, the world’s No 4 wind turbine maker, said on Thursday its consolidated quarterly net profit rose almost doubled, boosted by rising orders, despite a foreign exchange loss.

Suzlon said consolidated net profit in the April-June quarter rose to 393.8 billion rupees ($9 million), compared to 200 million rupees reported a year ago. The company said its June quarter net profit was hurt by a 1.5 billion rupee forex loss

(Note: 393.8 billion rupees is not equal to $9 million.)

Now look at the NSE pages for Suzlon results, for Q1 2008-09 versus Q1 2007-08.

The EPS for this year is Rs. 0.01 versus Rs. 0.13 for last year. (0.65 is displayed, but you have to adjust that for a 1:5 split)

That is a DROP of 92%, not the “doubling” of net profit as announced by this article. In fact, Suzlon itself has announced to the exchange:

Suzlon Energy Limited has informed the Exchange regarding the consolidated Results for the quarter ended on 30-JUN-2008 as follows: Net Sales of Rs. 276046 lacs for quarter ending on 30-JUN-2008 against Rs. 194463 lacs for the quarter ending on 30-JUN-2007. Net Profit / (Loss) of Rs. 135 lacs for the quarter ending on 30-JUN-2008 against Rs. 1889 lacs for the quarter ending on 30-JUN-2007.

Given that, the article is plain wrong – and it seems to me that in the hurry to get the article out, the author failed to independently verify the results.

You might say that before “minority interest” the results show a 39 cr. profit, which is double, no?

I say how can you disregard minority interest? The funda: Take a company (call it “HugeCo”) that own 51% stake in another company (call it “SmallCo”) , and someone else (“Chotu”) owns 49%. HugeCo has its own standalone business, but in consolidated results must include SmallCo’s results too.

Now SmallCo makes Rs. 500 in sales, and Rs. 100 in net profit. In “Consolidated” results, HugeCo will add Rs. 500 to its own sales and the FULL Rs. 100 to its profit. It will also add SmallCos other details (Expenses, EBIDTA, etc.) to it’s p&L statements.

But obviously the entire Rs. 100 is not HugeCos, no? Rs. 49 is actually Chotu’s part of the deal – so Rs. 49 is subtracted from HugeCos consolidated net profit as “Minority Interest”.

So Suzlon has only made Rs. 1.35 crores, an EPS of 1 paise.

Against 13 paise last year. EPS has thus dropped 92%.
(Even Moneycontrol gets it wrong. Bloomberg is the only correct answer, it seems.)

Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial