KOLKATA/MUMBAI: Vedanta Ltd, formerly Sesa Sterlite, booked about $3 billion as goodwill impairment charges related to its oil and gas business, possibly the biggest such write-down in the country’s corporate history.
The company reported exceptional items of Rs 19,956 crore for the quarter ended March 31, 2015, Vedanta said in its earnings statement on Wednesday.
The exceptional items include a non-cash impairment charge of acquisition goodwill in respect of the group’s oil and gas business aggregating Rs 19,180 crore for the quarter and the year ended March 31, triggered by the significant fall in crude oil prices.
A separate impairment charge of Rs 505.2 crore was made in respect of exploratory wells in Sri Lanka as the development of the block was not commercially viable at current prices, Vedanta said in the statement.
For natural resource companies that bought assets during their heyday, such impairments have been a regular feature, an analyst said.
Over the past few quarters, companies from BP and Royal Dutch Shell in the oil sector to miners such as Rio Tinto, Glencore and BHP have posted impairments running into more than $30 billion.
In May 2013, Tata Steel had announced a goodwill impairment charge of $1.6 billion on account of loss of value at its European steel business under Corus and other overseas assets due to a slump in demand in overseas markets.
“An impairment refers to any erosion in the value of an asset, including an intangible asset like goodwill,” said Raj Bagri, partner at Doshi, Chatterjee, Bagri & Co.
Vedanta’s oil and gas operations consist of the assets of Cairn India in India, Sri Lanka and South Africa, according to its website. Vedanta Ltd, the Indian listed subsidiary of Vedanta Resources Plc controlled by Anil Agarwal, owns 58.9% of Cairn India.
Vedanta Resources acquired a 58.5% stake in Cairn India, the largest private crude oil producer in the country, for $8.67 billion in December 2011.
West Texas Intermediate oil prices have declined from $107 a barrel in June 2014 to about $57 currently.
