Most Traded Government Securities :

 

 

Yield Curve :

 

 

 

 

Reliance Industries Ltd.

Reliance Industries Ltd. (RIL) has now become synonymous with growth. Over the years, it has proved this. From upstream petrochemical activities to refining to Insurance and healthcare, RIL has been setting a class of its own.

Reliance is now investing in telecom infrastructure business with massive funds infusion.

RIL is the leader in most of its product segments. In PFY, it has 32% share, PSF-58%,
LAB-36% and PTA-70%. It derives its competitive edge primarily from economies of scale
and integrated operations. RIL's marketing network comprises 500 distributors and 34,000
retail outlets.

Financials :

 

 

 

 

 

 

 

Financial Highlights for Q3FY01 :

For Q3FY01, RIL's operating margins have been affected due to increase in its key feedstock materials like oil and naphtha. This led to a fall of more than 20% at the operating margin levels YoY. However, the company has partially managed to offset this problem by pushing volumes.
The share of volume growth in the total revenue growth was 80%. Exports comprised around
12% of its revenues. Consequently, it was able to report an overall improved performance with
a 21% jump in PAT to Rs7.59bn, of which Rs1.72bn was accounted by foreign exchange gains.

Outlook :

On one hand, the international scenario on the raw material front looks rather bleak due to expectations of a further cut in production by OPEC, while on the other, the slowdown in the
US economy would further restrain demand for its finished products. However, from the long-
term perspective, the company is planning to expand capacities through de-bottlenecking and acquisitions, as it believes that the per capita consumption for its products in India is very low compared with even developing countries.

Polyester Division :

The polyester product prices of POY and PSF are normally linked to international prices. The Indian market could be facing supply deficit in polyester products. This will immensely benefit
RIL. Doubling of capacity through acquisition and debottlenecking, would help this division
dominate RIL's revenue growth.

Similar trend in volumes and prices are expected to continue for its Intermediates division.

Polymer Division :

The company manufactures HDE, PP and PVC product under this division. Right now, there is
no deficit in India for its HDE and PP products, while in PVC; the deficit is expected to continue
for the next two years. The surplus condition would remain for the next three years. Hence, overall margins could remain under pressure for sometime atleast in the country.

Lastly, its Oil & gas production from existing fields has grown at 5%-10% per year. It has been awarded 14 exploration blocks recently under new NELP.

RIL Telecom Venture :

Reliance Industries has now embarked on being a major telecom infrastructure provider in India.
For this, it would be investing more than Rs300bn and envisages having a major foothold over
both, air as well as on the land routes. The entire project would cover more than 80,000 km of which around 10,000 km has already been laid. The company already has a large foothold over
the Indian cellular services and contemplates having a major presence in the basic telecom sector covering the major industrialised states.

Recommendation :

The RIL Board approved the plan to sell 13% stake in Reliance Petroleum. This could add to
RIL cash flow by almost Rs30bn. at current RPL prices. Further, RIL would be consolidating
with Reliance Petroleum from FY02 would enhance its earnings by almost 30%.

Its Q3 results were better than expected despite high feedstock (naphtha) prices and with the management reiteration that the production has not been affected due to the Bhuj earthquake,
we expect its profit growth to sustain in the last quarter of the current financial year. Lastly, if one were to consider the market value of Reliance Industries' investments made in its subsidiaries, then its value would be at least half of the current market capitalisation of RIL. Hence, in spite of a higher discounting level of 13x its FY02E earnings, it remains a favourite BUY on our recommended lists of companies.

Profile | Services | Feedback | KSec Views | Passage | Media | Reports | PMS | Home Site Maintained By - SAW Designs