Essar Energy (LSE:ESSR) Interest Coverage : 1.05 (As of Mar. 2013)

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What is Essar Energy Interest Coverage?

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income by its Interest Expense. Essar Energy's Operating Income for the six months ended in Mar. 2013 was £524 Mil. Essar Energy's Interest Expense for the six months ended in Mar. 2013 was £-499 Mil. Essar Energy's interest coverage for the quarter that ended in Mar. 2013 was 1.05. The higher the ratio, the stronger the company's financial strength is.

Warning Sign:

Ben Graham prefers companies interest coverage is at least 5. Essar Energy PLC interest coverage is 1.05, which is low.

The historical rank and industry rank for Essar Energy's Interest Coverage or its related term are showing as below:

LSE:ESSR' s Interest Coverage Range Over the Past 10 Years
Min: 0 Med: 1.36 Max: 1.62
Current: 1.05

LSE:ESSR's Interest Coverage is not ranked
in the Oil & Gas industry.
Industry Median: 6.62 vs LSE:ESSR: 1.05

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Essar Energy Interest Coverage Historical Data

The historical data trend for Essar Energy's Interest Coverage can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

Note: For Interest Coverage, "No debt" indicates no long-term debt. An indication of "No Debt" does not necessarily mean that the company has no long-term debt obligations; it could be due to missing data in the quarterly or annual report. Use caution when interpreting this information.

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Essar Energy Interest Coverage Chart

Essar Energy Annual Data

Trend

Dec09

Dec10

Mar13

Interest Coverage

1.36

1.62

1.05

Essar Energy Semi-Annual Data
	Dec09	Dec10	Mar13
Interest Coverage	1.36	1.62	1.05

Competitive Comparison of Essar Energy's Interest Coverage

For the Oil & Gas Refining & Marketing subindustry, Essar Energy's Interest Coverage, along with its competitors' market caps and Interest Coverage data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

Essar Energy's Interest Coverage Distribution in the Oil & Gas Industry

For the Oil & Gas industry and Energy sector, Essar Energy's Interest Coverage distribution charts can be found below:

* The bar in red indicates where Essar Energy's Interest Coverage falls into.

Essar Energy Interest Coverage Calculation

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage

-1

Operating Income

Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

The company did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt & Capital Lease Obligation is 0, then

The company had no debt ⁽¹⁾.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Essar Energy's Interest Coverage for the fiscal year that ended in Mar. 2013 is calculated as

Here, for the fiscal year that ended in Mar. 2013, Essar Energy's Interest Expense was £-499 Mil. Its Operating Income was £524 Mil. And its Long-Term Debt & Capital Lease Obligation was £2,392 Mil.

Interest Coverage	=	-1	*	Operating Income (A: Mar. 2013 )	/	Interest Expense (A: Mar. 2013 )
	=	-1	*	524.3	/	-498.576
	=	1.05

Essar Energy's Interest Coverage for the quarter that ended in Mar. 2013 is calculated as

Here, for the six months ended in Mar. 2013, Essar Energy's Interest Expense was £-499 Mil. Its Operating Income was £524 Mil. And its Long-Term Debt & Capital Lease Obligation was £2,392 Mil.

Interest Coverage	=	-1	*	Operating Income (Q: Mar. 2013 )	/	Interest Expense (Q: Mar. 2013 )
	=	-1	*	524.3	/	-498.576
	=	1.05

The higher the ratio, the stronger the company's Financial Strength is.

Essar Energy (LSE:ESSR) Interest Coverage Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company's overage Financial Strength .

Essar Energy Interest Coverage Related Terms

Thank you for viewing the detailed overview of Essar Energy's Interest Coverage provided by GuruFocus.com. Please click on the following links to see related term pages.

Essar Energy (LSE:ESSR) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Energy » Oil & Gas » Essar Energy PLC (LSE:ESSR) » Definitions » Interest Coverage

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

http://www.essarenergy.com

Essar Energy plc is incorporated in United Kingdom. It is a holding company. The business activities of the Group of which it is the parent are those of an India-focused energy company with assets across the power and oil and gas industries. The Group comprises four operating divisions are Refining and Marketing India, Refining and Marketing UK, Exploration and Production, Power Generation and Transmission. Refining and Marketing India owns a petroleum refinery on the west coast of India, together with a 50% interest in a petroleum refinery in Kenya, and oil retailing stations on franchise across India. Its products are high speed diesel, motor spirit, fuel oil and superior kerosene oil. The activities of Refining and Marketing include the refining of crude oil and trading, marketing and transportation of finished products and by-products. Refining and Marketing UK products include high speed diesel, motor spirit, fuel oil and superior kerosene oil. The activities of Refining and Marketing include the refining of crude oil and trading, marketing and transportation of finished products and by-products. Exploration and Production has a diverse portfolio of 15 blocks for the exploration and production of oil and gas in India, Indonesia, Madagascar, Nigeria and Vietnam. Power segment operates gas and liquid fuel-based power plants in India and Canada together with a number of mining assets. Corporate comprises Essar Energy plc and its subsidiary companies that provide services to the Group as a whole.

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