The discovery of the world’s largest gas find coupled with the launch of it ambitious telecom services and the acquisition of management control in Indian Petrochemical Corporation Limited had made India’s largest company the toast of the market during the bull run of late 2002.
However, the positives are beginning to fade. The telecom venture now looks shaky and the core petrochemical operation looks subdued.
At Rs 45,898 crore (Rs 42,089 crore), income from operations was up 9 per cent over the year-ago period. According to Reliance, a higher degree of integration and value addition combined with higher volumes and a greater focus on speciality products has enabled the company to report this growth in operational income.
An improved gross refining margins and better domestic to export mix of refined products also helped. At Rs 37,533 crore (Rs 34,213 crore) the operational costs went up 10 per cent over the corresponding previous period.
Operating profit rose 6 per cent over the corresponding previous period to Rs 8,365 crore (Rs 7,876 crore), while the OPM went down to 18 per cent from 19 per cent during the preceding year.
Other income at Rs 1,001 crore (Rs 782 crore) was 28 per cent up from last year, while interest cost, which stood at Rs 1,555 crore (Rs 1,825 crore), fell 15 per cent over the corresponding previous period.
For the fourth quarter, Reliance’s net sales were up 16 per cent over the December quarter to Rs 12,755 crore. Its operational costs rose 22 per cent over the same period to Rs 10,737 crore (Rs 8,831 crore) leading to operating profits moving down by 6 per cent over the December quarter to Rs 2,018 crore (Rs 2,142 crore), while the OPM skidded to 16 per cent from 20 per cent during the December quarter.
Other income was up 21 per cent, while interest costs were down 17 per cent. Despite a massive 88 per cent reduction in the tax provisioning net profit was up by just 2 per cent over the December quarter to Rs 1,101 crore (Rs 1,083 crore).
The stock currently trading at Rs 273 discounts its full year EPS of Rs 29.40 by nine times. Though it seems to be undervalued given the 45 per cent bottomline growth, there is no growth in its core business — profits were as much a result of reduced taxes and interest costs.