Supported by a rise in Other Income,Reliance Industries reports a respectable net profit of Rs 3501 crs in Q3

For Reliance Industries’s Q 3 Profits for the Q ended December 31,2008,few estimates were over Rs 3500 crs…some were even below Rs 2700 crs and the consensus revolved around Rs 3000 crs

Despite an expected drop in Margins,Revenues and Profits to reflect challenging times,Reliance,true to form,showed a respectable profit of  Rs 3501 crs in Q 3 against Rs 3882 crs yoy,supported by an increase in Other Income from Rs 241 crs yoy to Rs 641 crs

Gross Refining Margins are US $ 10/barrel.Cash and Cash Equivalents are Rs 28500 crs.Revenues are split 37% and 63% between Petrochemicals and Refining

Reliance may fail to notch an EPS of Rs 100+ for FY 2008/9 on fully diluted equity of Rs 1580 crs as it is unlikely to notch up profits of Rs 16000 crs for the full year.Gross Refining Margins and Quantum,if any,of Hedging or Speculative Loss on Oil Price Plays holds the key for profits that will be reported  for this Q 4 

Back of the Envelope Valuation on Earnings Multiples

Unless we are confronted with a shock on Derivative Losses on Oil Price Plays,even if camouflaged as Higher Cost Inventories,the likely EPS for FY 09 would be in the Rs 90 to Rs 95 range.At Rs 1136 closing today,the multiple would be @ 12.With expectations of Krishna Godavri Basin Gas contributing to revenues and profits from FY 10 and without much equity dilution,the Forward EPS estimates for FY 10 revolve around Rs 115…Applying a Multiple range of 7-14,the Share price Range in 2009 should be Rs 800-Rs 1600 and will depend on prevailing seniment and Earnings in FY 10.For Reliance to race away back towards Rs 2000 in 2009,a better sentiment has to prevail in the Markets to facilitate a higher multiple than 14…this is unlikely to happen anytime soon

Looking at the Downside…if the Sensex,currently has gone yet again below 9000 and is at 8800 levels, seeks to sink even below 7000 sometime in 2009,then Reliance will fall in sync towards Rs 800 with forward multiple falling to 7…unless global markets get hysterical and unless Reliance shocks with some significant scam,I don’t see Reliance below Rs 800 in 2009 or above Rs 1600 for that matter.It closed at Rs 1136 today.Results came in after market hours,so expect some rally tomorrow.   

4 thoughts on “Supported by a rise in Other Income,Reliance Industries reports a respectable net profit of Rs 3501 crs in Q3

  1. Gaurav,
    We have known Reliance and Ambanis for a very long time. Dhirubhai and share holder value days are long gone. Look at their merging and demeging games of group companies and how investors are screwed in the recent IPO. Now, do you really want to invest in Reliance and Ambanis?

    I was shocked when I read Reliance Power IPO prospectus. Here is a guy telling you to invest with him in a scheme in which he pockets 90% of the money you have given him and ONLY 10% of YOUR MONEY will be invested on your behalf, rest of YOUR MONEY invested belongs to Anil. With such promoters and supporting cast of charaters (Kotak, Enam, ICICI Securities, UBS, JM Financial… lead managaers of the issue) how can retail investors make money?

  2. Kumar – I agree with your views. ADA group is another Satyam in the offing.

    But Mukesh is better. Runs businesses with strong fundamentals. Yes, he screwed up big time with retail & semiconductor plans.

  3. Hi Kumar,

    A year ago the IPO of Reliance Power created unprecedented hype…largely manipulated…. and the role and intent of all the Managers to the issue was suspect

    However Anil Ambani does not pocket 90% of what we invested at Rs 400+ as we did not buy the shares on Offer of sale from Him….What happened is as below

    The promoters would be holding 90% of the Shareholding,most at Rs 10 and therefore carry a lower risk than you would at Rs 430 or Rs 450…they would have contributed Rs 2000 crs (Rs 10 for 200 cr shares or 88.5% stake) + Rs 1440 Crs (Rs 450 for 3.2 cr shares or just 1.5% stake)) aggregating Rs 3440 crs for a 90% stake and you would be contributing Rs 10123 crs at Rs 430/450 for a 10% stake of 22.6 crore shares

    In other words,the promoters ,(Reliance Energy 45% and Anil Ambani 45%)have paid really nothing much in their contribution to the post issue networth of Rs 13563 crs for their 90% stake!

    Amusingly the QIBs and FIIs who were allotted just 1% of what they had applied for did not buy the shares even at lower quotes when Reliance Power got listed in Feb 2008….confirming a growing suspiscion that their Original Applications were merely an eye wash and did not indicate genuine interest….Possibly to create hysteria in the retail investors segment !

    Reliance Power earned hundreds of crores on the Application Float Monies of lakhs of crores as retail investors created record oversubscription by applying as if their lives depended on this Issue !

    The IPO had opened on Makar Sanskrant last year….It’s been ‘Kati Patang” for all RelPower Investors since then !

  4. Gaurav,

    Thanks for your reply.

    You have taken the term ‘pocketing’ too literally. We are saying the same thing slightly differently. Bottomline is this – for every 100 rupees I have invested only about 10 rupees is invested on my behalf.

    How can anybody justify such a scheme – all the major players in this business seemed to have conspired to screw ordinary investors. When this is so obvious, why hardly anyone protested. How can we see our children work for these a..holes, there are not many good options – they are everywhere. Really sad situation.

Leave a Reply

Your email address will not be published. Required fields are marked *