BIG BOY Reliance-Result Awaited

The flagship company of Reliance Group, Reliance Industries, RIL has announced its third quarter results. The company's Q3 net profit was up 28.14% at Rs 5,136 crore versus Rs 4,008 crore.

Its net sales were up 5.15% at Rs 59,789 crore versus Rs 56,856 crore.

Excerpts from Reporter's Diary on CNBC-TV18 Watch the full show »

SP Tulsian, sptulsian.com says, the numbers are slightly above than what he was expecting on the bottom-line. On top-line, the numbers are flat, he adds. "I think Q4 is likely to be better than Q3."

He is quite positive on the petchem segment in the next two to three quarters.

According to him, the gross refining margins (GRMs) could be close to USD 9.5 per barrel in the fourth quarter. "I expect a GRM of close to USD 9.5 per barrel, provided crude remains at USD 90 per barrel," he adds.

Tulsian says, till expiry, RIL share should rule in the range of Rs 970 to Rs 1,000.

Here is a verbatim transcript of the exclusive interview. Also watch the accompanying videos.

Q: What is your initial take on the numbers?

A: I had estimated a profit after tax (PAT) of Rs 5,060 crore and the company has reported Rs 5,136 crore. I had estimated net sales of Rs 59,450 crore and company reported net sales at Rs 59,789 crore. So, I don’t think that there is too much variation atleast as per the expectations on the top-line. But, yes, on the bottom-line, it is marginally up may be by about Rs 75 crore which all could come largely because of the lower depreciation or may be some tax adjustments or may be slight increase in the other income.

GRM, I was expecting at USD 8.9 per barrel. So, I think broadly if you really ask me, it is slightly above than what I was expecting on the bottom-line, on top-line it is flat. The market was expecting probably at Rs 5,200 crore, so there may be a little disappointment. But, overall, I don’t think that there should be any disappointment to the market from these results.

Q: Petchem margins, what’s the expectation going forward, are they expected to improve from here on?

A: If you take the present scenario, whether on the polymer front or may be the polyester front and especially the polyester intermediate, when you talk to the yarn makers or the textile makers, they say that they are sitting with the demand draft and asking for polyester staple fiber from the company. The delivery period as of now is two-three months. It has obviously given the selling or the pricing power also to the company. I don’t think that these thing is going to ease out on this atleast on the polyester intermediate front over next six months or so because you cannot really have the production of the cotton getting improved. So, this is going to be the real growth driver for the company.

The margin expansions will keep happening because again as I said 14.81% was my estimation for earnings before interest and tax (EBIT) which has now come to 15.2%. So, this is on the polyester front.

Even if you see on the polymer front also, even there the pricing power has been quite good. The kind of ramp up which we have been seeing in crude, again there I don’t think that even if I take a virtually the status quo on the polymer front or may be the pricing power remaining with the company over polyester, I am quite positive on the petchem segment in the next two to three quarters.

Q: I remember last time on the concall Mr Alok Agarwal saying that mid-cycle margins are seen between USD 9.5-10 a barrel. We have clearly not moved despite Q3 being a very seasonally strong quarter. All the factors being supportive, we haven’t moved really to that. By when do you expect us or Reliance to move towards a mid-cycle margin of say USD 9.5 or do you think there could be a blip up before we can head to that level?

Excerpts from Reporter's Diary on CNBC-TV18 Watch the full show »

A: If the crude prices remains at this level, may be at about USD 90 per barrel, I don’t think that the company will really be in a position to ramp it up beyond USD 9.1 or 9.2 per barrel. The only scope where they can really ramp it up may be beyond USD 9.5 per barrel is the light heavy crude differentials because again we have seen the gap between light and heavy crude differentials widening in the global market. Reliance being the refineries with the highest Nelson complexity, they should be able to take advantage of that.

If you take the case of USD 9 per barrel, which they have reported for this quarter, I think may be the contribution of about 30-40 cents must have come because of that. But this has started at the fag end because if you see the trend that has started happening from the December month onwards. I am quite positive that for January- March quarter the company should be able to enjoy the light heavy differentials of atleast 50 cents to may be 70 cents. So, I should expect a GRM of close to USD 9.5 per barrel provided crude remains at USD 90 per barrel. If it falls, obviously it will have the prorata effect. If it moves up, to that extent the increase in the crude prices can get added to the GRM. But yes going ahead the trigger for expansion in the GRM margin would be the light heavy crude differentials.

Q: Where do you see the stock price headed? Do you think Reliance is going to continue to underperforming streak for the time being or you think there could be some value buying that could emerge and then take the stock higher from these levels?

A: To sum up, I think Q4 should be better than Q3. I don’t think that there should be any disappointment by the market barring the technical factors which you see ahead of the expiry. So, may be it should be able to hold a level of Rs 970-975. But, yes, equally it will have a resistance also at Rs 1,000. So, it is more the technical factor because we have seen huge shorts built up not in Reliance, otherwise also in all frontline counters. So, it is difficult to take how the market will see the short covering on Monday, Tuesday and Thursday because Wednesday being a holiday. So, in a nutshell for next three days, till expiry the share should rule in the range of Rs 970 to Rs 1,000. I don’t see any reason for disappointment by the market on the pricing front for the share and Q4 is likely to be better.

Tata Steel FPO subscribed 6 times

The follow-on public offer of the world's seventh largest steel company Tata Steel, which closed today, has subscribed 5.9 times so far, reports CNBC-TV18.

Qualified institutional investors led the major support to the issue - with their reserved portion subscribed 10.41 times. Retail and non-institutional investors' reserved portion was subscribed 1.27 times and 7.21 times, respectively.

Tata Steel FPO subscribed 6 times

The issue received bids for 29.07 crore equity shares as against issue size of 4.87 crore shares (excluding anchor investors' portion).

The company aims to raise Rs 3,385.8-3,477 crore through the 5.7 crore shares' issue at price band of Rs 594-610 a share.

Tata Steel intends to use issue proceeds for partly financing the company’s share of capital expenditure for expansion of existing works at Jamshedpur; and payment of redemption amounts on maturity of certain redeemable non-convertible debentures issued by the company on a private placement basis.