Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Reliance: Creating a colossus - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 2, 2002

    Reliance: Creating a colossus

    The first day of March in 2002 was in no terms ordinary. While a bandh had been called by a communal party in protest against communal uprising in Gujarat, investors -- maybe having the day off -- decided to shop on the bourses resulting in a hundred point rise on the BSE. But minisculing all that has been the amalgamation announcement from the Ambani group.

    The amalgamated picture

    (Rs m) 3QFY01 3QFY02 Change 9mFY01 9mFY02 Change
    Net sales*** 148,570 131,280 -11.6% 407,090 418,940 2.9%
    Other Income 1,220 2,020 65.6% 3,590 5,700 58.8%
    Expenditure 126,890 107,820 -15.0% 346,560 359,530 3.7%
    Operating Profit (EBDIT) 21,680 23,460 8.2% 60,530 59,410 -1.9%
    Operating Profit Margin (%) 14.6% 17.9%   14.9% 14.2%  
    Interest 5,650 4,640 -17.9% 16,520 14,650 -11.3%
    Depreciation 5,660 6,420 13.4% 16,100 18,670 16.0%
    Profit before Tax 11,590 14,420 24.4% 31,500 31,790 0.9%
    Extraordinary items - 3,580   - 4,180  
    Tax 670 530 -20.9% 1,830 1,860 1.6%
    Profit after Tax/(Loss) 10,920 17,470 60.0% 29,670 34,110 15.0%
    Net profit margin (%) 7.4% 13.3%   7.3% 8.1%  
    No. of Shares**   1673.47     1673.47  
    Diluted Earnings per share*   41.76     27.18  
    * annualised ** assumed amalgamation ratio 1:8 ***Not considering inter-company sales

    As per the announcement, boards of the two Ambani flagship companies, Reliance Industries Ltd. (RIL) and Reliance Petroleum Ltd. (RPL) with meet on March 3, 2002 to consider the amalgamation of RPL with RIL. The amalgamation will be subject to approval from shareholders of the two companies and the Mumbai High Court. Speculation will be rife on the proposed amalgamation ratio. The scrip are likely to witness increased trading volumes in the fresh week ahead.

    The financial story

    CMP Rs 322.6 28.6
    Sales Rs m 222,613.3 339,960.0
    EBITDA Rs m 45,906.7 33,307.0
    PAT Rs m 28,560.0 16,920.0
    OPM % 20.6% 9.8%
    NPM % 12.8% 5.0%
    EPS Rs 27.1 3.3
    BVPS Rs 140.1 16.7
    Shares o/s Nos 1,053.8 5,202.0
    Mkt. Cap Rs m 339,889.3 148,777.2
    EV Rs m 440,240.9 223,272.0
    P/E x 11.9 8.8
    CMP/BVPS x 2.3 1.7
    EV/EBITDA x 9.6 6.7
    RoNW % 18.0% 16.8%
    RoA % 8.9% 7.4%

    We undertook a small exercise to gauge what the megamoth will look like. The income statement does not consider inter-company sales. Therefore, actual reported sales for the new entity is likely to be lower. Sale of crude oil to RPL is estimated to have been Rs 3,964 m in FY01 representing 2% of RIL's gross sales. On the other hand, RPL, besides supplying fuel to RIL's power plants, also sells naphtha to the company for its core petrochemical business. The amalgamation could result in lower central and state indirect taxes. RPL is exempt from sales tax for 14 years. That said, operating profits are not likely to be affected. Therefore, aggregation at the bottomline is likely to be more accurate.

    The swap ratio for the amalgamation is likely to be in the range of 8 - 11 shares of RPL for every 1 share of RIL. The final ratio will depend on whether the companies look at book value or market value of assets. In case the two companies choose to give higher weightage to market values, the ratio will move in favour of RIL and vice versa in case companies look at book values.



    Equitymaster requests your view! Post a comment on "Reliance: Creating a colossus ". Click here!


    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 24, 2017 12:29 PM


    • Track your investment in RELIANCE IND. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts