Buy Cairn India; target of Rs 317: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com's report on Cairn India

Cairn India reported its Q2FY15 results with revenues at Rs 3982.1 crore, down 14.4% YoY and PAT at Rs 2277.9 crore, down 32.7% YoY. The results were below our estimates on account of the planned maintenance shutdown at the Rajasthan facilities and a suspension of gas sales at the Ravva block.

Average gross production from the Rajasthan block in Q2FY15 stood at 1,63,262 boepd (our estimate: 1,80,334 boepd) whereas the net oil & gas production for the company stood at 1,23,178 boepd (our estimate: 1,35,445 boepd). The production from the MBA field has now normalised and is expected to increase to pre-shutdown levels. It is as per the FY15 guidance.

"The company has given $1.25 billion loan for two years to the Vedanta group at the rate of Libor+300 bps. The management has attributed higher yield of ~3.5% than current cash yield of ~1.5%. This raises a question mark on the utilisation of future cash flows and dividend payout, which will impact the return ratios and shareholder value creation. However, operationally, the company has received continued success on the Rajasthan exploration programme with three new discoveries during the quarter. Cairn has established ~1.4 billion boe hydrocarbons in place with an additional ~0.6 billion boe discovered but yet to be tested. Cairn is currently trading at an implied Brent crude price of US$84/barrel. We estimate Cairn’s fair value at Rs 317/share (Rajasthan fields at Rs 216/share) with a BUY recommendation on the stock", says ICICIdirect.com research report.

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