X

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.
RIL faces the heat - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Apr 23, 2002

    RIL faces the heat

    Reliance Industries Ltd. (RIL), the flagship company of the Reliance group, has decalred its results for full year ending March '02. FY02 has been a tough year for RIL. The company was faced with lower realisations. Commodity prices were hit, as brakes were applied on global economic growth rates. The weakened domestic economy, which accounts for approximately 85% of sales, led to lower demand. Feedstock prices continued to remain volatile, especially in the second half of the fiscal.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Net Sales 59,000 61,760 4.7% 254,290 228,720 -10.1%
    Other Income 1,780 1,430 -19.7% 3,830 5,750 50.1%
    Expenditure 45,650 48,940 7.2% 202,500 181,470 -10.4%
    Operating Profit (EBDIT) 13,350 12,820 -4.0% 51,790 47,250 -8.8%
    Operating Profit Margin (%) 22.6% 20.8%   20.4% 20.7%  
    Interest 2,910 2,010 -30.9% 12,160 9,310 -23.4%
    Depreciation 4,240 4,760 12.3% 15,650 17,350 10.9%
    Profit before Tax 7,980 7,480 -6.3% 27,810 26,340 -5.3%
    Extraordinary items - -   - 3,580  
    Tax 390 760 94.9% 1,350 1,780 31.9%
    Profit after Tax/(Loss) 7,590 6,720 -11.5% 26,460 28,140 6.3%
    Net profit margin (%) 12.9% 10.8%   10.4% 11.6%  
    No. of Shares 1,054 1,054   1,054 1,054  
    Diluted Earnings per share* 28.8 25.5   25.1 26.7  
    P/E Ratio         10.9  
    (* annualised)            

    On first glance, turnover of the company seems to have taken a major hit in FY02 with sales declining by double digits. In FY01, RIL registered significant amount of merchant exports, which were sourced from RPL. For fiscal ended March '02, RPL undertook majority of its exports, which impacted sales of RIL. Merchant sales were lower by 67%. That said, excluding merchant exports, sales of the company have declined by 3.9% and 5.6% respectively for the quarter and year ended March '02. Net sales have also been helped by lower excise duties. The effective excise duty rate has reduced by 1.4%.

    Exports, which had doubled in FY01, grew by a paltry 3.3% in FY02. Slowdown in global trade hampered the company's performance. Besides exports, the slowdown in the domestic economy accompanied with higher competition could have kept pressure on volumes. However, much of the emaciated performance at the topline is due to lower realisations, especially post September 11, as prices were lowered to boost demand. Consumption of polyester and polymers is estimated to have increased by 5% and 16% respectively for FY02. Since start of the new calendar year petrochem prices have been strengthening. We expect the core business of RIL to witness a turn in fortunes over the next two years.

    Operating profits of the company are lower, as a result of a drop in sales. For the full year, RIL has managed to protect margins. We had mentioned that operating margins are likely to sustain, as average feedstock (naphtha) prices have ruled lower compared to FY01 and reduced more than final product prices. Raw material costs are lower by 18% for FY02. Also, the company has been able to lift realisations by focusing on specialty products, which command higher rates compared to commodity prices. Specialty products now constitute 20%-30% of production. With a spurt in oil prices, which is likely to have reflected on naphtha prices in 4QFY02, margins for the quarter have taken a hit. However, with oil prices expected to cool down to $20-$22/ barrel, resulting in some respite for margins.

    The company has been reducing interest cost over the past four quarters. This is likely to be through improved efficiency in working capital, refinancing of high cost debt and repayment of loans. Other income of the company has increased substantially for FY02. This is primarily due to dividends earned from Reliance Petroleum Ltd. (RPL)., which are being accounted for on a pro-rata basis over the four quarters. Other income also includes interest earned on bonds issued by Reliance Infocom. Adjusting for other income, pre-tax profits would be lower by 14%. This indicates that the earnings from core business have deteriorated. Post tax profits has been lifted by extraordinary items, which pertain to sale of L&T stake to Grasim.

    At Rs 291, the scrip is quoting at a multiple of 10.9x FY02 annualised earnings. Adjusting for extraordinary items, the multiple rises to 12.5x. Approval for amalgamation of RPL with RIL is pending approval from the High Courts of Mumbal and Ahemdabad. The merged entity is likely to undergo a phase of capital intensive projects. These include exploration & production activities, building of petro retail outlets, participating in the privatisation of HPCL, BPCL & IPCL and the executing the infocom project. Consequently, the project risk is likely to increase, which could cap valuations.

     

     

    Equitymaster requests your view! Post a comment on "RIL faces the heat". Click here!

      
     

    More Views on News

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

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    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!

    More
    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

    RELIANCE IND. SHARE PRICE


    Aug 22, 2017 (Close)

    TRACK RELIANCE IND.

    • 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

    RELIANCE IND. 8-QTR ANALYSIS

    Detailed Quarterly Results With Charts

    COMPARE RELIANCE IND. WITH

    MARKET STATS