Five reasons why Reliance will open higher tomorrow

[Rajesh Desai]

Reliance Industries has posted a slightly better-than-expected set of numbers. Though prima facie the difference may be marginal, a closer look reveals that the quality of its numbers are stronger than expected and may call for a revision across the board.

Here are five reasons why the market will be excited with numbers.

 

1. Its net profit is higher at Rs 5,490 crore for September 2013 quarter as compared to market expectation of Rs 5,400 crore. However, this has been achieved on a marginally lower contribution from ‘other income’ and higher from its business divisions. Other income as a per cent of its operating profit has come down to 26.8 per cent as compared to 34 per cent in June 2013.

 

2. Higher operating profit of Rs 5,616 crore has been achieved despite a 3 per cent higher cost of crude oil on a year on year basis. This is despite the fact that gross refining margin (GRM) was only $7.7 per barrel as compared to $9.5 per barrel in September 2012 and $8.4 per barrel in June 2013.

 

3. Higher profits have been possible on account of higher contribution from its petrochemical division. Profits from this division increased sharply to Rs 2,504 crore as compared to Rs 1,888 crore in the previous year and Rs 1,704 crore for the same quarter in the previous year. Margins from this division improved to 10.1 per cent for September 2013 as compared to 8.6 per cent in the sequential quarter and 7.9 per cent in September 2012.

 

4. Decline of Oil and Gas division has been arrested. Both revenue and profitability has flattened. Revenue from this division stood at Rs 1,464 crore in September 2013 as compared to Rs 1,454 crore in June 2013 and Rs 2,254 crore in September 2012. Contribution to overall profit stood at Rs 356 crore, Rs 352 crore and Rs 866 crore respectively.

 

5. At the net level Reliance is cash positive with a cash chest of Rs 90,540 crore. On a per share basis this means each share has a cash component of Rs 280 with it. 

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CA. Rajesh Desai