Shares in Essar were up on the FTSE 100 in morning trading after the company reported a drop in it's a pre-tax profit in the half year period ended 30 June, despite a significant rise in revenue in the period.
The group said that its revenue in the half year period increased 66 per cent from the same period in the previous year to $4.8 billion. However pre-tax profit dropped 34 per cent to $154.4 million.
Essar also said that its net debt had fallen 27 per cent to $2.2 billion.
During the half year period Essar entered the FTSE 100 following an IPO which raised net proceeds of $1.85 billion.
In an outlook statement Essar said, "India continues to experience large and consistent power deficits and these are set to continue for the foreseeable future.
At the present time around 45% of households in India do not have access to power with the balance not having access to 24 hour electricity. Per capita consumption of electricity, at around 610 kW per annum is around a quarter that of China and this situation is likely to continue for some time.
"The lack of reliable supply to industry will clearly impact economic growth if not rectified. The Government of India has put in place a regulatory environment to encourage private sector participation in the power generation sector, but still the process of receiving regulatory approvals and delays to the access of fuel supplies means that progress is slower
Than expected. The current five year plan has forecast growth in generation capacity of 150GW over the plan period, but this target looks challenging.
"Petroleum product demand in India continues to demonstrate strong growth supported by growth in the Indian economy, increases in per capita income, growth in vehicle ownership and the focus on infrastructure spending. As a result, India will remain the anchor market for Essar's expanded refinery capacity with sales to public sector oil companies, direct bulk sales and sales through our retail fuel network. Recent de-regulation of the gasoline price with a clear path towards deregulation of diesel prices should increase competition which in turn should increase sales and profitability of our retail fuel network. Post phase 1 of the refinery expansion, the Company will produce a higher proportion of Euro Grade IV and V fuels increasing the value of sales to the export markets which currently comprises around 30% of total sales.
"However, Naphtha and fuel oil being replaced by gas is a growing concern for Indian refiners.
"India imports around 80 - 85% of its crude oil needs and despite significant discoveries of both oil and gas in recent years, this situation is expected to continue. The Company has eleven of its seventeen oil and gas and CBM blocks located in India. Given the domestic demand scenario, commercialisation of these assets represents a significant opportunity for
Essar Energy to create value for its stakeholders."
By 09:20 shares in Essar Energy were up 1.84 per cent on the FTSE 100 to 416.10 pence per share.