Reliance has declared results and here’s a quick summary of what happened in one of India’s largest companies.

Revenues and Profit Flat QoQ, Hardly Any Growth

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We’ve seen about 10% revenue growth from the previous year, but profits have remained flat at Rs. 5,500 cr. for the quarter. This has been flatlining since Sep 2012.

EPS Growth at 0.6%, Trailing Twelve Month EPS Reverses Trend

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Earnings per share has been flat at Rs. 68 per share. The upward trend in the Trailing Twelve Month (TTM) EPS which was due to the dip in Reliance’s profit in 2011-12 is now losing that window and has reversed its upward trend, moving down to 12.5%.

At Rs. 870 per share, Reliance has a P/E of 12.8. This is not too low, but not as high as some of the other companies in the Nifty. Justificably so, because this is now a commodity company.

Oil and Gas: Tapering production, Panna-Mukta Shows Small Uptrend

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Down and to the right. Even the Panna-Mukta production increase is hardly anything to write about.

Refining Margin at $7.8

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Petrochem Output Flat, Demand Slow

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They say:

RIL’s 3QFY14 Petrochemical EBIT declined 15.2% Q-o-Q to ` 2,124 crore impacted by poor domestic demand for polymers and polyester, sequential decline in regional deltas for key products – PP, PVC and fibre intermediates.

 

Cash Comes Down, So Does Debt

They’ve got a truckload of cash, more than 88,000 cr. And then they have 81,000 cr. of debt.

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If Reliance tried to retire its debt through the cash, all banks would fall at their feet, because they are one of the best debt customers and will skew bank ratios tremendously! But that’s probably not the reason it keeps cash – the cash needs to be used in the new investments it will make.

Overall Segments

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This doesn’t inspire a lot of confidence. Revenue growth has been there in the Petrochem business only, and the profits there are flat.

Retail Does Well, Jio is not yet living

The Retail format is doing well, supposedly, with 38% turnover growth at Rs. 3927 cr. Profit before taxes for that segment is at Rs. 271 cr. for the first nine months, but they haven’t mentioned the profits of the previous year (presumably because they didn’t have any).

The Jio Infocomm business has the pan-India Broadband access and a unified telecom licence but nothing’s happening yet. They have a lot of employees, and a lot of tie ups with Reliance Communications and Bharti Airtel, but we have yet to see this business work out for the diversified giant.

Should I Buy?

I always get this question. The answer is: I don’t know.

I had bought some of this stock but before the results I decided to sell. No real reason other than that there is better money to be made elsewhere!

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It really hasn’t gone anywhere in three years, and even after a Rs. 3900 cr. buyback the stock remains stagnant.

I’d focus on the midcaps where there is a lot more growth. But sentiment in Reliance can change dramatically if the Jio Infocomm business takes off.

Also, there are a few pending cases by SEBI, and the focus is on them about Oil and Gas (that they have tried to raise gas prices in government contracts and therefore are holding back on producing gas). But gas prices will be increased in April and if that isn’t shot down by a new government, Reliance’s old oil-and-gas bet might finally see some good returns. Overall, it’s a stock I would keep in a non-aggressive portfolio; but in my head, equity bets need to be aggressive for the small investor.

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