Essar Steel's (ESL) fourth quarter net profit jumped 178% to Rs 272.8 crore, helped by strong demand and increased production of high-margin steel.

Total income, net of excise, rose 57% to Rs 1,926.6 crore, but the company's shares slipped by 2.16% in a lacklustre market to Rs 58.80.

Essar's operating profit jumped 145% to Rs 699.5 crore for the quarter, while finance costs doubled to Rs 147.7 crore. ESL chairman Shashi Ruia attributed the performance to its production of high-margin steel, which rose to 35% of the overall output, compared with just 20% last year. Mr Ruia added that the company is implementing a number of measures to remain one of the lowest cost producers of steel in the country.

ESL's net profit for the year-ended March '05 jumped eight fold to Rs 590.2 crore, while total income, net of excise, grew 65% to Rs 6,121.3 crore for the year. ESL's earning per share for the full year stood at Rs 10.17 a share. At its current share price, the PE for the company stands at 5.78.

Operating profit for the full year increased 157% to Rs 2,204.1 crore, while interest expenses rose 38% to Rs 550.7 crore. Steel demand has risen over 6% in the year-ended March '05 as robust economic growth helped companies post higher sales. Prices of hot-rolled coils, the company's main product, have risen 15-18% in the past year, maintaining the trend of steady increase since plummeting to $250-280 per tonne in '01.

The company has communicated to the stock exchange that in accordance with the terms of corporate debt restructuring (CDR) and the approval of shareholders, ESL had received the approval of the Gujarat HC to reduce the equity capital by 40% and issue 0.01% cumulative redeemable preference shares in lieu of the reduced equity.

ESL has said that subject to approval of regulatory authorities, it will issue compulsorily convertible preference shares (CCPS) worth about $450m. The CCPS will be issued to Prime Holdings, a promoter company, for an amount not exceeding $337.5m and Asia Steel Holding, a non-promoter company, for an amount not exceeding $112.5m.