RIL Q1: More money from refining, less money from money

By Jagannadham Thunuguntla, Head of Research, SMC Global

1. The Reliance Industry (RIL) results for the Q1 FY 13 have been slightly better than the estimates.

2. There is definite positive surprise on the GRM (Gross Refining Margins). The estimated GRM was about US$ 7 per barrel, but the company has posted GRM of US$ 7.6 per barrel. That’s definitely positive during this quarter. Singapore GRMs during the quarter were about US$ 6.6 per barrel. Hence, the Reliance has posted about US$ 1 per barrel premium over Singapore GRMS, which is significant premium. Reliance has got such a healthy premium about 3 quarters back. So, this is a definite improvement from the company point of view.

3. One more interesting aspect of the financials is the "Other Income" segment. The proportion of "Other Income" has reduced to 35% of the overall Profit Before Tax. This is a reduction from the 42% share in the previous quarter. This indicates that the Quality of Profits has increased in case of Reliance from the Operation Profit point of view.

4. The company has aggressively started the buyback with about Rs 2000 Crores of buyback already completed. Further, one can expect that the company will go more aggressively in the coming quarters with buyback. This can reduce the overall cash balance of the company. Hence, one can expect further reduction of share of Other Income in the future quarters as well.

5. To summarize, in this quarter, Reliance has made more money from refining and less money from Money.

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