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Nikhil Singh
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Summary
Nayara Energy, previously known as Essar Oil, stands out as a leading global downstream oil company. Since its inception, the firm has shown impressive growth within the sector. Nayara Energy has attracted considerable interest with its bold objective to expand its business operations by 50% by 2030.
Overview
Nayara Energy, previously known as Essar Oil, stands out as a leading global downstream oil company. Since its inception, the firm has shown impressive growth within the sector. Nayara Energy has attracted considerable interest with its bold objective to expand its business operations by 50% by 2030. This strategic plan is anticipated to boost the company's success while offering substantial opportunities for potential investors. The company has yet to enter the public market, making early investments in its unlisted shares potentially advantageous. Therefore, let us explore Nayara Energy's plans for a 50% business expansion and the implications for the company's future.
Formar CEO Alois Virag mentioned the company's future. He stated that India's need for energy would increase. Prime Minister Narendra Modi said during Indian Energy Week that the demand is now 250 million tons. By 2040, it's expected to be 450 million tons. Viraj and PM Modi confirm that there's a big growth story. Naraya Energy wants to join. Viraj also said that the demand for petrochemicals is a fast-growing sector in the economy. India imports more than it exports in this sector.
A big boss from Nayara Energy said they want to help. They want to make India make more of its own petrochemical stuff. That's why they're making 450,000 tonnes of something called polypropylene by the end of the year. The big boss also said he would be really happy to get invited to a big meeting in Rome between the heads of Indian and Italian companies. India's economy is growing faster than any other big economy in the world. The big boss believes this can help their company and the world grow as well.
Business Model & Segments
Essar Oil is transforming its business by investing in green energy projects like hydrogen power, natural gas, eco-friendly fuels, and plant-based ammonia, while also funding construction ventures such as ports and network systems to support these initiatives; they are expanding into steel production with a focus on green steel factories to meet the demand for sustainable products, embracing technology to enhance operations and exploring store-based businesses to reach more customers. This strategic shift aims to lower debt by divesting less important parts of the business, improve financial stability, concentrate on core strengths in energy, infrastructure, steel, and technology, enable easier scaling without significant capital investments, and create a more resilient business model that can better withstand market fluctuations.
London-based Essar Oil is a major force in the oil industry, and its not only in India but also other countries. It's unclear how many nations they operate in specifically, but it's clear that they have a wide reach. The corporation has made strategic investments in a number of industries and owns power plants and refineries. It raised $181 million through a general mortgage on October 4, 2023. organisations such as the Hamburg Industrial Financial Institution and Mizrahi-Tefahot Financial Institution participated in this funding round. It is evidence of their robust presence and investors' faith in their capacity for expansion.
|
Attribute |
Value |
|---|---|
|
Cashflow - Financing |
-₹ 2,555.6 |
|
Cashflow - Operations |
₹ 3,455.5 |
|
Sub-sector |
Oil & Gas - Refinery & Marketing |
|
Category |
Large Cap |
|
Sector |
Energy |
|
Earning Yield |
12.52% |
|
Face Value |
₹ 10 |
|
Total Shares |
1,490,561,155 |
|
Total Income |
₹ 1,33,114 crore |
|
Profit After Tax |
₹ 12,321 crore |
|
Market Cap |
₹ 98,377.04 crore |
|
Enterprise Value |
₹ 1,10,480.04 crore |
Industry Research
India is a developing nation, and due to the industrial revolution and foreign direct investment (FDI), India’s oil and refinery market is experiencing significant growth. India is moving toward becoming a powerhouse for the entire world, which is leading to rapid growth in many industries. Every industry has a basic need for oil, and this demand is being met by India’s oil and refinery sector.
Especially in the automobile and defense sectors, the demand for oil is rapidly increasing in India.
In order to meet the growing demand, the government has implemented a number of policies. In various areas of the industry, such as refineries, petroleum products, and natural gas, it has permitted 100% foreign direct investment (FDI). Without requiring any disinvestment or dilution of domestic equity in already-existing PSUs, the FDI cap for public sector refining projects has been increased to 49%. As seen by the existence of businesses like Reliance Industries Ltd. (RIL) and Cairn India, it now draws both foreign and domestic investment. It is anticipated that the sector will draw US$25 billion in production and exploration investments. With 23 refineries, India is already a refining powerhouse, and plans are underway to expand in order to attract foreign investment in export-oriented infrastructure, such as export terminals and product pipelines.
According to the IEA's India Energy Outlook 2021, India's GDP is predicted to grow by US$ 8.6 trillion by 2040, while the country's main energy demand is predicted to rise by 203% to 1,123 million tonnes of oil equivalent.
Over the past ten years, India's refining capacity has grown from 215.1 million metric tonnes per annum (MMTPA) to 256.8 MMTPA. Additionally, by 2028, it is anticipated to rise to 309.5 MMTPA.
According to the a fore mentioned analysis, India is anticipated to be the primary driver of the rise in petroleum product consumption in non-OECD nations. Figure 3 shows that the consumption of petroleum products increased from 158.4 MMT in the 2013–14 fiscal year to 234.3 MMT of the fiscal year 2013–24.
The COVID-19 epidemic had a negative impact on the India Oil & Gas Market, which is estimated to be 38.12 Billion cubic metre in 2024 and is expected to reach 49.12 Billion cubic metre by 2029, growing at a CAGR of 5.20% during the forecast period (2024–2029). Currently, the market has rebounced to pre-pandemic levels.
Promoters of Nayara Energy
Nayara Energy does not have traditional promoters, as defined by the Companies Act of 2013. Instead, its ownership structure is dominated by large institutional investors. The major figures in the company's leadership are:
Alessandro Des Dorides, Chief Executive Officer
Prasad K. Panicker, Chairman
Khusrav Sanginov, Chief Commercial Officer.
Madhur Taneja is Chief Marketing Officer 134.
Operation and Reach
The company operates around 6,600 retail fuel outlets throughout India, the most of any private oil company in the country. Several infrastructure support its activities, such as a crude oil tanker facility, water intake systems, a multi-fuel power plant, and dispatch facilities via rail, road, and sea.
Shareholding pattern
Nayara Energy's primary investors are Kesani Enterprise Company Limited (49.13%), and Petrol Complex Pte Ltd. (49.13%).
Because the corporation is not publicly traded, the majority of the shares are held by its promoters.
Due to a spike in sales, revenue increased by 25% year over year (YOY) in FY23.
In contrast to the industry's 43% loss, HSD volume rose by 13%. Market share increased from 4% in FY22 to 6%.By breaking into new markets and market niches, the business increased the size of its clientele.For the sale of MTO, the business entered into contracts with significant paint producers. MTO's market share grew from 8% in FY22 to 11%.Export sales increased by 23% year over year, while sales to domestic OMCs increased by 61%. Because of government-imposed pricing limits, retail outlet sales fell 18% year over year.
Some recent updates regarding the company
In FY 2022-23, the Company redeemed ₹ 22,850 million of Non Convertible Debentures (NCDs) after receiving approval from lenders. During FY 2021-22, the Company issued these NCDs as Secured, Listed, Rated, Redeemable Non-Convertible Debentures having face value of ₹ 10,00,000 (Rupees One Million) each through private placement. With the early redemption of the NCDs on March 29, 2023, these NCDs have been removed from BSE.
On August 13, 2021, the Company additionally issued and allotted 22,850 Secured, Listed, Rated, Redeemable 9% Non-Convertible Debentures (Listed NCPs) with a face value of (Rupees One Million), totalling 22,850 million, through a private placement. These NCDs are listed on BSE Limited. According to Regulation 15 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), the Company is a 'high-value debt listed business'. This issuance was 128.5% oversubscribed, and the proceeds were utilised to redeem 2,400 Secured, unlisted, redeemable non-convertible debentures with face values totalling 24,000 million.
Peer comparison
|
Company Name |
Current Price (₹) |
P/E Ratio |
Market Cap (₹ Cr) |
Quarterly NP (₹ Cr) |
Dividend Yield (%) |
Sales (₹ Cr) |
|
Nayara Energy Ltd |
263 |
10.75 |
1,01,358.16 |
9,426.2 |
0 |
- |
|
Reliance Industries Ltd |
2,718.6 |
50.26 |
18,35,946.91 |
7,713 |
0.37 |
1,30,108 |
|
Indian Oil Corporation Ltd (IOC) |
165.35 |
8.14 |
2,31,941.34 |
2,643.18 |
7.13 |
1,93,235.51 |
|
Bharat Petroleum Corporation Ltd |
342.5 |
7.32 |
1,48,593.81 |
3,014.77 |
6.04 |
1,13,096.01 |
|
Hindustan Petroleum Corporation Ltd |
431.6 |
10.43 |
92,219.83 |
355.8 |
4.85 |
1,13,303.57 |
|
Mangalore Refinery and Petrochemicals Ltd |
165.53 |
11.15 |
29,575.13 |
65.57 |
1.78 |
23,247 |
Financials
The CEO said “ We registered a 12% y-o-y growth in revenue from operations, which stood at ₹ 1,546,293 million, and a 26 % y-o-y growth in net PAT, which grew from ₹ 95,916 million in FY 2022-23 to ₹ 120,852 million in FY 2023-24.”
Balance sheet
|
Particulars |
Notes |
As at March 31, 2024 |
As at March 31, 2023 |
|
ASSETS |
|||
|
1) Non-current assets |
|||
|
(a) Property, plant and equipment |
6 |
409,585 |
424,407 |
|
(b) Capital work-in-progress |
6 |
54,210 |
40,533 |
|
(c) Goodwill |
6 |
108,184 |
108,184 |
|
(d) Other Intangible assets |
6 |
271 |
229 |
|
(e) Intangible assets under development |
6 |
- |
15 |
|
(f) Right-of-use assets |
6 |
12,759 |
11,843 |
|
(g) Financial assets |
|||
|
(i) Investments |
7 |
27 |
27 |
|
(ii) Loans |
8 |
1,407 |
1,134 |
|
(iii) Other financial assets |
9 |
552 |
534 |
|
(h) Non-current tax assets (net) |
2,200 |
2,242 |
|
|
(i) Other non-current assets |
10 |
7,667 |
4,875 |
|
Total non-current assets |
596,862 |
594,023 |
|
|
2) Current assets |
|||
|
(a) Inventories |
11 |
103,933 |
95,953 |
|
(b) Financial assets |
|||
|
(i) Investments |
12 |
3,753 |
17,801 |
|
(ii) Trade receivables |
13 |
73,197 |
52,238 |
|
(iii) Cash and cash equivalents |
14 |
17,705 |
64,037 |
|
(iv) Bank balances other than (iii) |
15 |
42,332 |
5,122 |
|
(v) Loans |
16 |
412 |
327 |
|
(vi) Other financial assets |
17 |
34,078 |
2,157 |
|
(c) Other current assets |
18 |
4,503 |
5,520 |
|
Total current assets |
279,913 |
243,155 |
|
|
TOTAL ASSETS |
876,775 |
837,178 |
|
|
EQUITY AND LIABILITIES |
|||
|
EQUITY |
|||
|
(a) Equity share capital |
19 |
15,072 |
15,072 |
|
(b) Other equity |
20 |
420,598 |
291,263 |
|
Total Equity |
435,670 |
306,335 |
|
|
LIABILITIES |
|||
|
1) Non-current liabilities |
|||
|
(a) Financial liabilities |
|||
|
(i) Borrowings |
21 |
81,900 |
66,710 |
|
(ia) Lease liabilities |
38 |
14,470 |
13,041 |
|
(ii) Other financial liabilities |
22 |
22,712 |
117,695 |
|
(b) Deferred tax liabilities (net) |
23 |
74,880 |
74,632 |
|
Total non-current liabilities |
193,962 |
272,078 |
|
|
2) Current liabilities |
|||
|
(a) Financial liabilities |
|||
|
(i) Borrowings |
24 |
35,952 |
13,429 |
|
(ia) Lease liabilities |
38 |
1,263 |
1,191 |
|
(ii) Trade payables |
25 |
||
|
- Total Outstanding dues of micro and small enterprises |
269 |
434 |
|
|
- Total Outstanding dues of creditors other than micro and small enterprises |
117,546 |
145,415 |
|
|
(iii) Other financial liabilities |
26 |
72,865 |
78,407 |
|
(b) Other current liabilities |
27 |
17,156 |
17,991 |
|
(c) Provisions |
28 |
1,072 |
819 |
|
(d) Current tax liabilities (net) |
1,020 |
1,079 |
|
|
Total current liabilities |
247,143 |
258,765 |
|
|
TOTAL EQUITY AND LIABILITIES |
876,775 |
837,178 |
Profit & Loss
|
Particulars |
Notes |
For the year ended March 31, 2024 (₹ Cr) |
For the year ended March 31, 2023 (₹ Cr) |
|
Income |
|||
|
Revenue from operations |
29 |
1,546,293 |
1,378,213 |
|
Other income |
30 |
9,316 |
7,502 |
|
Total Income |
1,555,609 |
1,385,715 |
|
|
Expenses |
|||
|
Cost of raw materials consumed |
937,939 |
796,676 |
|
|
Excise duty |
219,777 |
207,257 |
|
|
Purchases of stock-in-trade |
132,876 |
117,146 |
|
|
Changes in inventory of finished goods, stock-in-trade, and work-in-progress |
31 |
(3,177) |
19,071 |
|
Employee benefits expense |
32 |
10,402 |
8,318 |
|
Finance costs |
33 |
21,423 |
21,619 |
|
Depreciation, amortisation, and impairment expense |
6 |
19,913 |
33,949 |
|
Other expenses |
34 |
55,314 |
54,135 |
|
Total expenses |
1,394,467 |
1,258,171 |
|
|
Profit before tax |
161,142 |
127,544 |
|
|
Tax expense: |
23 |
||
|
(a) Current tax |
41,121 |
10,238 |
|
|
(b) Deferred tax |
(831) |
21,390 |
|
|
Total tax expenses |
40,290 |
31,628 |
|
|
Profit for the year |
120,852 |
95,916 |
|
|
Other comprehensive income |
|||
|
Items that will not be reclassified to profit and loss |
|||
|
Remeasurement (loss) on defined benefit plans |
(117) |
(21) |
|
|
Income tax effect |
30 |
5 |
|
|
Items that will be reclassified to profit and loss |
|||
|
Effective portion of cash flow hedges (net) |
11,419 |
(9,469) |
|
|
Income tax effect |
(2,874) |
2,383 |
|
|
Foreign currency monetary item translation difference account |
34 |
52 |
|
|
Income tax effect |
(9) |
(13) |
|
|
Other comprehensive income / (loss) for the year, net of tax |
8,483 |
(7,063) |
|
|
Total comprehensive income for the year (comprising profit for the year and other comprehensive income / (loss) for the year) |
129,335 |
||
|
Earnings per share (Face value ₹10 per share) |
35 |
||
|
Basic and Diluted (in ₹) |
Conclusion
Open-Market Volatility: Volatility driven by the policy in the US and advantageous export margins
Margin expansion: It produces a sustainable margin by making low-cost ethanol procurements in the domestic market and through an increase in the volumes of ethanol blended, which are encouraged by the GOI project.
Plastics-Export Market: Domestic consumption of polyolefins increased by 8.2% in FY23 - 13.5 MMTPA, where PP grew by 7.7% and PE increased by 8.6%. PP reached 6.6 MMTPA and PE 7.0 MMTPA. Indian import volumes of PP have gone up to 1.6 MMTPA, allowing Nayara Energy's PP plant to enter the market easily. Demand for petroleum products grew by a healthy 10.2% during the last year and had reached 222 MMTPA.
Nayara Energy is positioning itself for growth by capturing market volatility, expanding margins through initiatives to blend ethanol, and entering the market of plastic export with conditions that allow it to enjoy ease in producing polypropylene (PP). Sustainability also forms a target area; the company could be moving toward working to achieve the government's green energy goal in this regard as it is teaming up with NTPC to ensure hydrogen storage projects. Thus, the established retail network of 6,500 plus outlets provided Nayara Energy with a solid foundation to take the lead in the strengthening of the energy supply for the country and eventually meet the future demand.
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