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Reliance: Under pressure

Jul 31, 2001

Reliance Industries Ltd. (RIL) has reported a dip in sales by 3.4%. Adjusting for merchant exports in the first quarter of the previous fiscal, sales of manufactured products has increased by 4.1%.

(Rs m) 1QFY01 1QFY02 Change
Sales 66,150 63,900 -3.4%
Other Income 780 1,270 62.8%
Expenditure 54,580 52,150 -4.5%
Operating Profit (EBDITA) 11,570 11,750 1.6%
Operating Profit Margin (%) 17.5% 18.4%  
Interest 2,980 2,570 -13.8%
Depreciation 3,660 3,960 8.2%
Profit before Tax 5,710 6,490 13.7%
Tax 280 310  
Profit after Tax/(Loss) 5,430 6,180 13.8%
Net profit margin (%) 8.2% 9.7%  
No. of Shares (eoy) 1,054 1,054  
Diluted Earnings per share* 20.6 23.5  
P/E Ratio   13.6  
*(annualised)      

Production of RIL has increased by 7% YoY to 2.8 m metric tonnes (MMT). The company has reported a 6% growth in volume sales, however, realisations have dipped by 2%. The slowdown in the global economy, weak domestic market environment, increase in global capacity expansions and volatiltiy in feedstock prices has led to a challenging operating environment.

The OPM of the company has improved by 90 basis points during the quarter. However, margins have declined QoQ by 230 basis points. Operating expenses for the quarter have declined due to the absence of any merchant exports of RPL in the current quarter.

Depreciation method on certain assets have been changed from straight line method to written down value method. The change has been made with retrospective effect. Interest expenses have declined in the quarter due to repayment of loans and refinancing of high cost debt with low cost debt. The pre-tax profits have been buoyed by higher other income. The company has earned dividend from its subsidiary, RPL.

At Rs 319 the company trades on a multiple of 13.6x 1QFY02 annualised earnings.


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