X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 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

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

RIL faces the heat

Apr 23, 2002

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)4QFY014QFY02ChangeFY01FY02Change
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 Tax7,9807,480-6.3%27,81026,340-5.3%
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*28.825.5 25.126.7 
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

RELIANCE IND. Announces Quarterly Results (4QFY19); Net Profit Up 9.5% (Quarterly Result Update)

Apr 22, 2019 | Updated on Apr 22, 2019

For the quarter ended March 2019, RELIANCE IND. has posted a net profit of Rs 104 bn (up 9.5% YoY). Sales on the other hand came in at Rs 1,416 bn (up 17.9% YoY). Read on for a complete analysis of RELIANCE IND.'s quarterly results.

RELIANCE IND. Announces Quarterly Results (3QFY19); Net Profit Up 9.6% (Quarterly Result Update)

Jan 18, 2019 | Updated on Jan 18, 2019

For the quarter ended December 2018, RELIANCE IND. has posted a net profit of Rs 104 bn (up 9.6% YoY). Sales on the other hand came in at Rs 1,603 bn (up 56.4% YoY). Read on for a complete analysis of RELIANCE IND.'s quarterly results.

RELIANCE IND. 2017-18 Annual Report Analysis (Annual Result Update)

Nov 28, 2018 | Updated on Nov 28, 2018

Here's an analysis of the annual report of RELIANCE IND. for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of RELIANCE IND.. Also includes updates on the valuation of RELIANCE IND..

More Views on News

Most Popular

I Believe this is the Best Stock to Buy Today (Profit Hunter)

Jul 3, 2019

The languishing small cap space is currently offering a very fertile market to pick up bargains at very attractive prices. This is a perfect opportunity ripe for the picking.

These 3 Smallcap Stocks are Set to Make the Most of Smallcap Rebound (Profit Hunter)

Jul 9, 2019

As the sense of normalcy returns to the markets, the rebound in the quality smallcaps could be huge.

2 Stocks from Super Investor Sanjay Bakshi's Portfolio You Can Bet On... (The 5 Minute Wrapup)

Jul 12, 2019

Despite the current fear prevailing in the markets, both these stocks have the potential to deliver in 4-5 years.

After Disappointing Budget, Here's a Document that Concerns Largecap and Smallcap Investors (The 5 Minute Wrapup)

Jul 8, 2019

A new 'definition' of the stock universe that triggered the smallcap sell-off is back with the latest list...

Union Budget 2019-2020: More Style Over Substance (The 5 Minute Wrapup)

Jul 5, 2019

Did the Union Budget announce measures to stimulate the economy and bolster corporate earnings growth?

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

RELIANCE IND. SHARE PRICE


Jul 16, 2019 11:23 AM

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

COMPARE RELIANCE IND. WITH

MARKET STATS