RIL: Joins the VRS party - Views on News from Equitymaster

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

  • MyStocks


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

RIL: Joins the VRS party

Jun 28, 2001

Corporate India seems to be on a belt tightening binge. Voluntary retirement scheme (VRS), the dirty word of yester-years has become part of the daily business vocabulary. In fact, companies offering VRS are being viewed in favourable light, as managements are seen taking initiatives to cut back costs and consequently, improve productivity and profitability. Reliance Industries (RIL) features in the list of companies offering voluntary severance packages to rightsize the workforce. The VRS package is part of the restructuring process at the textile complex in Naroda, Gujarat. The package has been accepted by approximately 4,600 employees and total outlay on the scheme is estimated at Rs 900 m.

Gains through VRS
No. of employees nos. 15,083
Staff cost Rs m 4,411
Cost / employee Rs 292,429
VRS cost Rs m 900
Employee opting nos. 4,600
VRS cost / employee Rs 195,652
Staff cost savings* Rs m 1,345
EBITDA Rs m 46,325
Savings / EBITDA 2.9%
VRS cost / PAT 3.4%
Savings / PAT 5.1%
* Estimates
Employees, staff cost, EBITDA for FY01

The share of textiles division in total revenues has been continuously declining over the past few years. The division contributed only 1% to the turnover in FY01, as compared to 5.1% in FY97. The restructuring at the textiles division, representing 1% of turnover, results in rightsizing manpower strength by 30.5%. The textiles division, it seems, besides contributing only marginally to the topline was a drag on post-tax profits, as it was employing more than 30% of the workforce.

Productivity led gains
(Rs m) FY98 FY99 FY00 FY01
Net Sales 115,107 126,238 178,499 254,293
PAT 16,527 17,037 24,033 26,456
Staff cost 3,099 3,583 3,748 4,411
Employees (nos) 17,375 16,640 15,912 15,083
Revenues / employee 6.6 7.6 11.2 16.9
PAT / employee 1.0 1.0 1.5 1.8
Staff cost / employee (Rs) 178,337 215,325 235,546 292,429

Although the VRS is the first drastic step towards rightsizing the enterprise the head count in the company has been steadily declining since FY99. Consequently, employee productivity numbers have increased impressively over the years. One can expect much improved productivity levels in the current fiscal. It can be seen that the revenue / employee has grown at a much faster pace compared to profits / employee. This indicates that costs have been increasing at a faster clip compared to revenues and consequently putting pressure on net profit margins.

To beat the rising other operating expenses organisations and RIL will have to increase the productivity of employees to prevent profits and more importantly margins from eroding.

RIL: Matching global standards
(Rs m) Reliance Ind. DuPont Dow
Revenues 280,083 1,357,621 1,320,414
PAT 26,456 126,968 77,888
Employees 15,083 93,000 50,000
Revenue / employee 18.6 14.6 26.4
PAT / employee 1.8 1.4 1.6

Equitymaster requests your view! Post a comment on "RIL: Joins the VRS party ". Click here!


More Views on News

GUJ. STATE PETRONET at All Time High; BSE OIL & GAS Index Up 0.5% (Market Updates)

Jun 17, 2021 | Updated on Jun 17, 2021

GUJ. STATE PETRONET share price has hit an all time high at Rs 326 (up 3.9%). The BSE OIL & GAS Index is up by 0.5%. Among the top gainers in the BSE OIL & GAS Index today are GUJ. STATE PETRONET (up 3.9%) and RELIANCE IND. (up 0.4%). The top losers include BPCL and ONGC (down 0.4%).

What's Driving the Rally in Reliance Shares? (Views On News)

Jun 1, 2021

The recent run up in Reliance Industries shares helps Nifty post new record highs.

RELIANCE IND. Announces Quarterly Results (2QFY21); Net Profit Down 7.1% (Quarterly Result Update)

Nov 4, 2020 | Updated on Nov 4, 2020

For the quarter ended September 2020, RELIANCE IND. has posted a net profit of Rs 105 bn (down 7.1% YoY). Sales on the other hand came in at Rs 1,162 bn (down 23.6% YoY). Read on for a complete analysis of RELIANCE IND.'s quarterly results.

RELIANCE IND. 2019-20 Annual Report Analysis (Annual Result Update)

Aug 5, 2020 | Updated on Aug 5, 2020

Here's an analysis of the annual report of RELIANCE IND. for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of RELIANCE IND.. Also includes updates on the valuation of RELIANCE IND..

RELIANCE IND. Announces Quarterly Results (1QFY21); Net Profit Up 27.8% (Quarterly Result Update)

Jul 31, 2020 | Updated on Jul 31, 2020

For the quarter ended June 2020, RELIANCE IND. has posted a net profit of Rs 129 bn (up 27.8% YoY). Sales on the other hand came in at Rs 912 bn (down 43.5% YoY). Read on for a complete analysis of RELIANCE IND.'s quarterly results.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Jun 17, 2021 11:00 AM


  • 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