Yet another poor quarter saw the stock of oil producer Cairn India cede about 3 per cent today to its yearly-low before recouping ground lost since Monday. The company’s sales fell 41 per cent year-on-year in the June quarter to Rs 2,627 crore while profit slipped 24 per cent to Rs 835 crore. There was a large exceptional charge in the year-ago period, excluding which the fall in the profit would have been much higher. The blame for the weak show lies primarily on the rout of crude oil, which began last June — the company’s realisation in the recent quarter was $56 a barrel equivalent, down 42 per cent from the $97 a year ago. Also, it did not help that Cairn India’s output fell 4 per cent year-on-year.

On a sequential quarter basis too, the company’s revenue dipped 2 per cent despite product realisations improving 16 per cent. This was due to the increase in the share of revenue payable to the Government. In the March quarter, the impairment of the Sri Lankan asset had pushed the company into losses. The June quarter saw Cairn India return to profit, though much lower than in the earlier quarters.

With crude oil prices again under pressure due to the Iran nuclear deal and Saudi Arabia producing at record levels, the respite on the realisation front seen last quarter is unlikely to continue for Cairn India. This could mean a continued poor show by the company. Also, the overhang of the proposed merger with Vedanta is likely to weigh on the Cairn India stock until clarity emerges. While the management says that the merger is on track, reports suggest that institutions such as LIC and United India Insurance are not happy with the merger terms. Besides crude oil price, whether the merger will go through or not will be a key factor deciding the fortunes of the stock. It has lost more than half its value over the past year.

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