Carbon credits make a comeback for Navin Flourine, SRF

Navin Florine gets 5 lakh carbon credits from UN and is valued at 7 million euro. However, SRF is likely to bag 9.5 lakh carbon credits and is valued at 12.6 million euro. Carbon credits are clearly making a comeback. CNBC-TV18’s Varinder Bansal.

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In the last two quarters, these companies are getting their quarterly balances from the UN. The prices have been increasing steadily. January 2008 was the period when the certified emission reductions (CERs) prices hit a roof, which was around 23-24 euros. It felt to as low as nearly 8 euros in June 2008. Now they have been increasing from 8 euros to around 12.5-13 euros.

There has been a confirmation from Navin Fluorine that they have bagged nearly 5 lakh CERs from UN. SRF and Gujarat Fluorochem are expecting that they will be receiving their quarterly installments in mid December. This is very crucial for these companies. These are valued around 7 million euros. This is nearly Rs 40 crore. In FY09, they reported Rs 45 crore of profit. In the first half of FY10, the total profit was Rs 50 crore, which means if they bag around Rs 40 crore, there would be a big push on the bottomline.

If SRF is bagging around 9.5 lakh CERs, the total value will be Rs 80 crore. In FY09, the total PAT was Rs 140 crore and in the first half it was around Rs 160 crore. So you add that Rs 80 crore, minus the corporate tax, you will see a bump up happening in this company. These installments are on the quarterly basis. Most of these companies apply to UN based on the prices which are being traded on the UNFCCC and also on the cost, which is involved in this. Most of the companies go on quarterly, six monthly or yearly basis.

Navin Fluorine has got carbon credits for the period between August-December. It takes around two-three months for these companies to give these carbon credits, so that the next tranche will be coming around March. Most of these companies are bagging CERs, since these companies will be reporting good profits with the steady increase of the CER prices.

The reason why so much of fluctuation is happening in the prices is because there is so much of trading happening on the UNFCCC side on the CERs and also the demand supply gap was huge. If I can correlate it with the Baltic Dry Index, the reasons are huge volatility and trade in the CERs.