Reliance Industries – Why is it being re-rated?
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Printed Date: 19/Apr/2025 at 8:13pm
Topic: Reliance Industries – Why is it being re-rated?
Posted By: basant
Subject: Reliance Industries – Why is it being re-rated?
Date Posted: 23/Aug/2006 at 7:31pm
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Reliance Industries – Why is the stock being re-rated? Globally conglomerates trade at a discount to focused players. In Contrast this with a situation if British Petroleum or Exxon Mobil would have indicated its plans to get into retailing or property development. The stocks would have been slammed down very hard. Analysts tend to value companies in two ways (a) The discounted cash flow method which had been a Warren Buffet favorite and (b) The EPS/ PE way. I have tried to look at how both these valuations would lead to de-rating of the stock in case of the proposed forays. Why the market remains upbeat bests me. The discounted cash flow method: This method works on the premise that companies that throw up significant free cash flows year after year would have their stocks being valued at a Net Present value of these cash flows. So if Reliance is invest9ng Rs 25,000 crores into its retailing forays and another significant amount into SEZ’s each year the company’s free cash flow would diminish and hence the NPV of the projected cash flow will tend to come down. The EPS/PE method: Either the company uses its own cash or takes on further debt to expand into its newer territories. In both the cases the Net profit will be adversely affected and so is the EPS. In the first case the company loses opportunity cost of capital that was earning some interest and in the second case the company bears additional cost on the debt. The RoE and the RoCE would also decline.. Still the stock finds new buyers. This has been an anomaly that I have found too hard to decipher. Normally I would back Reliance into an SEZ and Retailing but a logical impact on the company’s financials reveals that the valuations need not increase at least till such time that the investment phase in the new business is over. Then how could Analysts argue on the re-rating of the stocks. I have two opinions: a) The new business is a high PE business as in the case of Reliance Industries Ltd. So while all over the world you may have a petrochemical company quoting at a PE of 10 times a Retailing venture could quote at a PE of 20 times. In the anticipation of the retailing venture going on stream analysts try and re-rate the whole PE upwards. b) This one is more popular and an analyst would like to include the cash flow right up to the year that it turns positive and then discount it back to present value. The net result would be an increase in the NPV. While the exact methodology is very difficult to understand the fact is that existing companies getting into new ventures get their stocks re-rated and then the company is classified as a conglomerate. After a while the stock is de-rated downwards because conglomerates enjoy lower discounting. After that the company announces a de-merger and the stock gets re-rated again! Can some one throw light on what actually happens? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Replies:
Posted By: Ajith
Date Posted: 23/Aug/2006 at 11:18pm
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The whole valuaion isuue is quite complicated especially due to the planned IPO which will be of course at a premium.If after 5 or 6 years , Reliance Retail as is generally expected has a market cap of Rs 1 lakh crores what would Reliance stake be?Of course Reliance valuations will be affected probably positively by other factors like Reliance Petro,the refining margins,the exploration efforts etc. In the shortterm will not return on capital employed suffer but the positive impact of mega retail plans may nullify this negative factor.
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Posted By: basant
Date Posted: 23/Aug/2006 at 11:27pm
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Yes, i agree but I am trying to raise a point that probably has various explanations one of them being that the market is looking ahead and not into the immdediate future. this is so because in the immdediate future the return ratios /cash flows and everything will be adversely impacted. Now if the same thing had happened in the West for example had BP wanted to get into retailing or SEZ the markets would have shut the stock down. They would have argued that a company is best suited to stick into areas where it enjoys core competencies. Also I have nothing against Reliance but at the moment the market is not pricing in any execution risks. After all Reliance will not have the first mover advantage and if you pay for the land at the higher rates it will show up in your return ratios.
They messed up Infocom and had it not been for their petrochemical cash flows infocom would have been in deep water.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Ajith
Date Posted: 23/Aug/2006 at 12:25pm
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On the execution front I would give the highest rating to Trent. Since my personal time horizon is 6 years I am not concerned about the slow pace of recent years or the declining operating margins of Trent and my holding is yet to scale up.So also with Reliance the real take off will happen after 6 years and there may be shortterm hiccups but even then not even Wal Mart had they been allowed to would have attemted such a scale of operations.I am however doubtful of the advisablity of Reliance investing in other sectors as well on a large scale simultaneously-what if there is a downturn in the petro cycle?NO ONE IS CONSIDERING THIS..
It is good that Pantaloon is focussing on just the metros and not trying to fight Reliance all over the country.As it is Pantaloon has a lot to do.
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Posted By: basant
Date Posted: 01/Sep/2006 at 4:20pm
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Market grapewine has it that Biyani and Ambani have reached a settlement in terms of the areas each one would get into for instance as Reliance moves into tier II towns Pantaloon shall concentrate on the Metros.BusinessWorld reported a few months back that at one point in time both were on the verge of getting together then something fell away. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: vip1
Date Posted: 25/Oct/2006 at 12:04pm
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Basant ,Reliance is the most cash rich Indian Company with Cash of Rs 40,000 crores while Pantaloon has a negative Cash Flow. Businesses like Retail need tremendous Cash Flows .There was a Cover article in Businessworld with Biyani on the Front Cover , 1 or 2 months back why Pantaloon needs to double its turnover every year just to survive .
Reliance main Cah Cow is its refinery just imagine the Cash it and oil and Gas productions will generate by 2008 onwards when it doubles its capacity . It will not only provide massive cash for expansions but eat into competition
I think one can definitely rely on Reliance.
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Posted By: basant
Date Posted: 25/Oct/2006 at 12:18pm
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I cannot disagree on that Reliance's project execution skills have been very good Inspite of having such large Balance Sheet size they are still able tio reflect a RoE of more then 18% on a consistent basis.It remains the number 1 choice for a large cap portfolio. No doubt on that. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: catcall
Date Posted: 13/Nov/2006 at 7:29pm
| TV-18 has reported the likelyhood of RIL entering into the pharma sector, most likely thru' a takeover. i'm not sure if this is such a good idea at least in the short term. maybe it has more to do with the no-compete clause between the two brothers by which once one of them enters aparticular sector, the other will not enter it (I reached there first!!). This is far away from RIL's area of core functioning. For any other company one would have immediately given a caution call but with RIL's reputation,it's a tough call. Boarders views are invited on this issue |
Posted By: tigershark
Date Posted: 13/Nov/2006 at 8:44pm
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the way DIVIS LAB has been moving up for the last couple of weeks and
reliance mutual funds invested init , it appears to be the one
that the ambanis are targetting , i sold out at 1300 after i gotit at
ipo avaluable lesson that i have learnt
------------- understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things |
Posted By: basant
Date Posted: 13/Nov/2006 at 9:21pm
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Reliance MF belongs to the "Marathon" Ambani group and TV18 reported Mukesh Ambani to be interested in Pharma. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Ajith
Date Posted: 13/Nov/2006 at 10:22pm
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Reliance getting into pharma .I think its too much.I mean ,there is a limit to ambition or is there not?No one's thats big,to take on so much,spread themselves so wide and thin.There is something wrong here.The world is not so perfect.The best laid plans can go wrong somewhere.
Whats Reliance trying to achieve-be the biggest conglomerate of all times?Doesn't make sense unless petrochemicals is a hundred percent safe generator of free cashflow that would take care of all eventualities.
Maybe I am missing something and the amount for pharma is small and mananagement skills can be bought.
------------- Ajith |
Posted By: basant
Date Posted: 13/Nov/2006 at 10:35pm
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Mr. AJith. I agree with you 100%. Dhirubhai bult an empire that was linked forward and backward his elder son is making a ciircle with endless corners. Petrochem, Retail,SEZ, Pharma, Media (they were reportedly getting into the news and entertainment space).
Had I been a shareholder I would not have been amused one bit!!! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: reetesh
Date Posted: 13/Nov/2006 at 11:20pm
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Once I read some where that Dhirubhai wanted to make Reliance like Shell(if my memory is serving me right) anyways it was either Shell or Chevron, but now I think Mukesh`s dream has changed now he wants to make this company like GE.. One more point about Dhirubahi, I am not taking away the fact that he was very good business man he was also very good at Stock Market trading..
In my view Reliance is getting re-rated and should continue because of its GAS find in KG basin and they recently increased there estimates of amount of reserves is there..
These 2 are buying everything, earlier it was only Anil now even Mukesh is in business or spreading rumor and making money. But, between them I will go for Mukesh.. ------------- When going gets tough, that’s when tough (people) gets going. |
Posted By: reetesh
Date Posted: 13/Nov/2006 at 11:25pm
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Now point about Mukesh`s RIL is getting into news space, this shows how big the pie is or market is.. ------------- When going gets tough, that’s when tough (people) gets going. |
Posted By: catcall
Date Posted: 14/Nov/2006 at 6:44pm
| Reliance has been described in the past as "The Bubble that did not burst!!" . While over the years , the comany has grown so large that it would be unfair to charactorise it as a bubble , leave alone one that would burst, this kind of seemingly disorganised expansion does give investors a cause for worry.... |
Posted By: xbox
Date Posted: 14/Nov/2006 at 5:06am
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I am bearish/Neutral on RIL: WHY ??? read on ...
Let's look at RIL's businesses...refinaries, petro derivatives, oil and gas exploration.
Investments are in retail, rpl, logistics (may be).
Refinaries and petro derivatives are highly cyclical businesses. All along refinaries were low margin biz but from last 2-3 years they are making huge profits based on soaring oil prices. Best I can say it is a commodity. When prices are high, they will make more profit and vice-versa. This biz requires huge investmant and depricision is also quite high. World over these companies fetch low PE discounts (9-10). On downturn they even go to 4-5. See classic example to Tata steel.
Oil and Gas biz is promising. But this will be seperate company. It means investment in this company will only fetch dividends (going forward). I guess RIL will bring strategic partner for this biz.
RPL is pure investment play. They will derive only dividends.
Retail is again a pure investment play. They will derive only dividends.
Logistics is already a seperate company. They will derive only dividends.
ALL SEZs are again a seperate company. They will derive only dividends.
All I am saying is RIL is using it's cash to invest in seperate company. Which have long turn-around time and dividends from them will be negligible as compared to investments. Anology is like this.. RIL giving money to lender for 2-3% interests (in form of dividends). High PE is not discounted to company which have huge investments in other companies. Rather those company enjoyes high PEs where invetments are made in current businesses.
Only positible part of RIL is expantion of it's existing refinaries (not rpl). Which will boost topline and bottomline.
Unless RIL makes demerger of these companies in future, It will not create wealth for investors. Now after ADA exiting from RIL, I see no hope for future demerger. In one way ADA helped minority shareholders by demerger.
All along we were seeing current capacity expansion from RIL, so EPS were increasing but from now EPS will only increase due to jamnager expansion. All other investments (in retail, exploration, logistics, SEZs) will create value for promotors but not for the minority shareholder. ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: basant
Date Posted: 14/Nov/2006 at 9:03am
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In one way ADA helped minority shareholders by demerger.
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You make a very good point. ALso if we recall Mukesh AMbani had wrapped up RCOVL untill ADA blew the whistle. Can anyone say why Reliance's stock keeps going up inspite of all this. Is the market discounting no execution risks in reliance whereas there could be many!!! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: nikhil090
Date Posted: 24/Nov/2006 at 5:02pm
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Reliance is my biggest holding - almost 20%. Have been holding it for past 12 years. It has still managed to grow and provide good returns on a compounded basis also.
It has the highest shareholding among retail investors.Company still seems to be broadly on track. |
Posted By: kulman
Date Posted: 16/Dec/2006 at 6:40am
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http://www.dnaindia.com/report.asp?NewsID=1069412 - How will finance flow for Mukesh Ambani’s giga plans?
Reliance Industries (RIL) is known for its ability to successfully plan and execute huge projects in its core business area of refining and petrochemicals with supreme efficiency.
And it’s hardly a secret that RIL has once again drawn up huge investment plans to backward integrate into oil & gas exploration and production, which, as per the company’s own estimates, would cost $5.2 billion. That apart, RIL’s foray into retail is also estimated to cost a few billion (rough estimates put the figure at $2-3 billion). Besides, its plan to set up SEZs, too, is estimated to cost a similar amount. Analysts haven’t put a figure in this case, as details of the venture are awaited. While executing projects super-efficiently is one part, what about funding all this? Recently, the RIL board gave a carte blanche to its treasury department to raise $2 billion overseas through a combination of equity and syndicated loans, bonds and FCCBs. But that’s just $2 billion. What about the rest? Marketmen say raising that should be a breeze. Says Amitabh Chakraborty, business head, privileged client group, Brics Securities: “It should not be a problem for Reliance. Every time they required funds, we have seen that they have managed to get it with a good mix of equity and debt.” The multibillion-dollar question for the company-trackers is whether a convertible bond issue will mean a dilution of equity or whether RIL will again soak money through the debt route. If RIL chooses the equity route, it could be either fresh (least likely option) or part dilution of treasury shares (12.2% stake in RIL) held by the trusts — the current market value of which is Rs 21,446.50 crore. A Reliance spokesperson told DNA Money the company does not have plans to monetise the treasury stock. Marketmen rule out both the options, at least in the near term. Says Amitabh: “Right now we have no expectations on equity dilution, but we have seen that companies have diluted equity at appropriate times.” One reason here could be the reasonably sufficient scope to leverage the company’s balance sheet. RIL’s debt to equity ratio stood at 0.46:1 as on March 31, 2006. The company’s consolidated shareholders’ funds stood at Rs 51,028 crore and total debt at Rs 23,342.80 crore as on the same date. “The company can comfortably go up to a gearing of 1 (or 1:1 debt-equity), besides the net debt: equity ratio would be lower adjusting for the cash and investments on the company’s books,” said an analyst with a foreign brokerage who tracks the company. Add to this the company’s annual cash flows, which, after meeting dividend and regular capital expenditure requirements, would add to more than Rs 27,000 crore over the next three years. Plus cash flow from the oil & gas operations would start in 2008 latter half, while Reliance Petroleum’s new refinery will start in 2009-10. Big cash will flow in then. In this light, even if the total investment into new businesses and backward integration works out to $8-10 billion, raising resources, for the time being, is unlikely to be an issue for Reliance - until the petrochemicals cycle moves the other way anytime soon. ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Siddhartha
Date Posted: 17/Dec/2006 at 4:47pm
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May be they can manage finance for new businesses, And even company have been showing good execution skill.
But what is happing in the world, GE or Simens they are doing only those businesses in that they are number one or two in market position.
It could be never easy for any company to manage so many business.
We can take example, What is happen with Simens mobile recently?
In the case of Wall-mart, they had tried to establish their business in Germany for 8 years, they got never sucess and after 8 years they sold their business to Metro, a second largest retailer in the world.
The point is that, even Wall-mart had to face problems in its own business.
Reliance is exception because thea are big in India and we are still closed (protected) Economy. They can manage to compete with one Biyani or Mittal. If we are 100 % open Economy, they will be not able to do so many business.
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Posted By: vip1
Date Posted: 12/Jan/2007 at 12:51pm
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"COS MAKE A BEELINE FOR RELIANCE SEZ" ECO TIMES TODAY Sez project opens in the next 2-3 Months. The world,s Richest Indian Unofficially (DLF) , Unitech,Parasvnath come from this region .This SEZ itself will be worth the total Market Cap of Reliance in the next 2-3 years. Rest business for free.
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Posted By: basant
Date Posted: 12/Jan/2007 at 1:18pm
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Will Shahrukh Khan invite Mukesh AMbani for the KBC3? If so he would win the fastest finger first round ahead of Biyani and Bahl!!! ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: chic_1978
Date Posted: 17/Jan/2007 at 7:19pm
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Basantjee There are strong talks in "Mungerilal's" of Reliance announcing split ???? What do you feel & if at all they split the FV then what will be the implications in value ? Will the share re rated ?
------------- happy & wise investing |
Posted By: vip1
Date Posted: 18/Jan/2007 at 6:44pm
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We might have apprehensions on Reliance ,
but ultimately RESULTS SPEAK
http://www.moneycontrol.com/india/stockpricequote/refineries/relianceindustries/18/26/pricechartquote/marketprice/RI - Reliance Industries came out with its Q3 results. The company reported good earnings in third quarter, the net profit posted at Rs 2,799 crore versus Rs 1,776 crore, up by 57.6%.
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Posted By: deveshkayal
Date Posted: 20/Jan/2007 at 11:41am
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Very long interview with Mukesh Ambani so take time and read
Part 1 http://www.rediff.com/money/2007/jan/17inter.htm - Mukesh Ambani on his childhood,youth
Part 2 http://www.rediff.com/money/2007/jan/18inter.htm - Mukesh Ambani on how Reliance was built
Part 3 http://www.rediff.com/money/2007/jan/19inter.htm - Mukesh Ambani on retail and SEZ plans ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: basant
Date Posted: 21/Jan/2007 at 2:47pm
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This is very informative especially the idea of keeping a non-academic teacher for Mukesh and Anil. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: PrashantS
Date Posted: 21/Jan/2007 at 5:56pm
| well was Dirubhai really a manipulator........as i wasnt born when he was rocking in India...................or was he really a visionary....i have heard lot of stories about him....anyone has any interesting story about him .....i think we should have seperate section for sharing our thoughts on such people..... |
Posted By: deveshkayal
Date Posted: 21/Jan/2007 at 6:29pm
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I just know he started the equity cult in India.If u want to know more watch GURU.I have heard it is based on his life. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: sanjay3
Date Posted: 21/Jan/2007 at 1:48am
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RIL plans to hive off KG assets, offer stake
PIYUSH PANDEY TIMES NEWS NETWORK[ MONDAY, JANUARY 22, 2007 12:17:55 AM] MUMBAI: Reliance Industries (RIL), the country’s largest private sector company, is planning to spin off its oil & gas assets in the hydrocarbon-rich Krishna-Godavari basin into a separate company and offer a stake to a foreign partner, a person familiar with the developments said. The Mukesh Ambani-controlled oil & petrochemical giant is discussing the move internally as part of its plan to begin commercial production from the fields. An RIL spokesperson declined to comment on an email questionnaire on the issue. But a senior RIL official said that a separate subsidiary is being contemplated. “We are thinking along these lines. It is too early to say anything else,” he added. There are three key reasons behind the thinking. One is to capture value. Goldman Sachs has estimated the value of the D6 discovery of 14 trillion cubic feet at between $36 billion and $40 billion. This amount is expected to rise in line with gas prices and additional discoveries. Selling a small stake to a foreign partner is likely to net a huge amount for RIL. Also, many of the discoveries are located in deep water, that is, depths of over 5,000 metres. Indian companies have little experience of operating in such depths in contrast to global oil giants like Chevron, Exxon and BP who have built up technical know-how over the years. A separate company could also solve the problem of funding. Transporting gas from the fields to the surface and then sending it across the country will require enormous capital. The Directorate General of Hydrocarbons has just approved RIL’s plans to begin commercial production of 80 million cubic metres per day from the D6 block at a cost of over $8 billion. With increasing prices of rigs and other development costs over the past two years, RIL’s cost of developing blocks has gone up more than three times. Additional discoveries will only push up this amount. While RIL has the financial muscle, a separate company with its own access to capital markets like Reliance Petroleum would be an ideal solution. US oil major Chevron, which already has a stake in Reliance Petroleum, is considered the frontrunner, sources familiar with the matter said. Chevron has a MoU in place to further collaborate in upstream and downstream sector. RIL had earlier held discussions with BP and BG Group for diluting stake in the block, but the negotiations fell through due to disagreements over the valuation. reliance denied for above mentioned hive off and partnership ------------- |
Posted By: vip1
Date Posted: 21/Jan/2007 at 9:47am
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In the journey of an entrepreneur, the most important thing is self-belief and the ability to convert that belief into reality-
Mukesh Ambani in an interview above, on his Childhood and Youth .
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Posted By: sanjay3
Date Posted: 22/Jan/2007 at 12:16pm
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reliance denied for hive off and partnership ------------- |
Posted By: Siddhartha
Date Posted: 26/Jan/2007 at 4:05pm
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Mukesh Ambani in Interview with Sheela Bhatt about his SEZ Plan.
.........................................................................................................
Is there this kind of arbitrage in agriculture? Let me give you some numbers. Take potatoes, the most common food across the world. From Bill Gates to my driver, everybody eats potatoes. Now, plot the prices. Farmers in Uttar Pradesh and Bihar get about Rs 4-5 a kilo; in the Middle East, the wholesale price is about Rs 25-30 a kilo. In the US, Sam's Club, it is Rs 90 a kilo. In Europe, it is Rs 110 a kilo. The arbitrage is 1:20. If we get our produce right, and if the US market is opened up, you will be surprised how quickly we reach $20 billion. The food market is much bigger than the software services market. And the money goes straight into the hands of millions of farmers. The spinoffs are enormous -- jobs, houses, durables, a whole new consumption boom will start in rural areas |
Posted By: CHINKI
Date Posted: 27/Feb/2007 at 8:44pm
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I donot know how many of you are aware the way Reliance implement. Not only they think big and they implement everything big.
First of all, they hire the best people, pay the best salary and get the best out of them. Take the case of Retail Outlets (petrol bunks). Each of their outlet is connected through Optic Fibre Cable. Right from the day one, their entire marketing operations was started with SAP. At any point of the time, they know the stocks of petrol or diesel in any of their outlet. Indent gets generated automatically once stock comes down to a point. It has been mechanised to such an extent that even some body opens the tank, people at Mumbai will come to know that. All these things were done to ensure that there will be no adultration at their retail outlets. Each of their outlets on highway is having minimum of 5 acres of space. Gradually they will have Dhaba, Convenient Stores, Tyre Shops.....so on at these outlets. Coming to the point, no wonder Adlabs will also do in the same way. If PVR has tied with Aamir Khan, they have signed Hrithik Roshan,John Abraham and more to follow. They are usually 10 steps ahead of their competetor. I feel Adlabs will be leader of this sector within 3 years if not early. ------------- TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO |
Posted By: basant
Date Posted: 27/Feb/2007 at 9:20pm
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Thanks for that info on Reliance's management style. I did not know that they worked in such depth and detail. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: CHINKI
Date Posted: 27/Feb/2007 at 11:16pm
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When their father was alive and both brothers were together, Anil was involved in raising funds in unique ways while Mukesh was master in executing projects of any dimension on time.
One of my classmate who was working in their Jamnagar refinery used to mention that during the time of construction of refinery, more than one lac workers were working in a single shift and it used two shifts a day. No wonder 27MMT refinery which is biggest in India was constructed in record time. Look at this. Essar who has conceived a refinery well before Reliance at the same place have just started trial runs while the PSUs refineries are yet to take off or some are still in the half a way through. Just yesterday I was reading an article about Roger Federer who is going to rewrite lot of records in Men's Tennis History. Ambanis have already done that in India in whichever the field they have entered. So TV18, Pantaloon, ENIL, India Bulls... have to be careful. These brothers are capable of doing anything which others feel not possible. They know only one thing : DREAM BIG and they have never let their investors down. ------------- TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO |
Posted By: omshivaya
Date Posted: 27/Feb/2007 at 11:37pm
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Excellent points Chinki ji, but on the flip side...let's have a look at what they have entered: 1) Oil - reliance is big, but so is ONGC or IOC
2) Telecom - Reliance is big, but so is Bharti or Idea
So, competitors are not going to be completely washed away. There's room enough for all, especially in media and retail. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: CHINKI
Date Posted: 27/Feb/2007 at 12:06pm
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I never meant to say that they will vanish all the competitors. Let us take ur examples only:
1) Oil : In the drilling, ONGC had one just one gas find while Reliance had more than 4 during last one year. Godavari basin gas find is one of the largest gas find in India. IOC had taken more than 60 years to build refineries of more than 60MMT while Reliance is taking just little more than six years to build a refinery having more than 54MMT capacity. Their refinery can process any crude in the world. The addl. capacity under construction can produce fuel meeting Euro III standards which none of the Indian refineries can do. They have constructed jetty of big capacities which allows big tankers to berth. This helps them to get crude of bigger parcel to receive as this will reduce the transportation cost and if need arise they can also export. Infact after their refinery commissioning, India became self-sufficient in LPG and India is earning lot of foreign exchange as they export most of their petrol so produced. Irespective of Indian economy, their refineries will run under full capacity as they will always find customers. You must have noticed during this qtr. results, their Gross Refinery Margin was one of the highest in Asia hence RIL profit was well above everybody's expectations. 2) Telecom : Because of the spat between the brothers, Rel. Commn. took some beating as Mukesh wanted to keep this company with himself as this was his brain child. I was told that at the time of cable laying, if Reliance wanted two, they have four ducts so that then can rent out other two in future. If Anil had got Hutch, then he would have reduced this time gap. But still they have the capacity to come close to Airtel. So if Reliance companies are not leaders in the respective industries, then they will be within two to three years. This is all what I wanted to say. ------------- TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO |
Posted By: omshivaya
Date Posted: 27/Feb/2007 at 12:33pm
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Yes I did understand that. The point I was trying to make was that, there is still room for growth in others even after Reliance gets into something. Reliance guys are definitely good at whatthey do. These guys work just like Microsoft, based on one single theory- monopoly. Let's see hwo things heat up in Media and Retail. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: deveshkayal
Date Posted: 28/Feb/2007 at 2:32pm
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Chinki i dont think TV18 have to be careful no matter Ambanis or any other player comes, it is a leader and will always be a leader in business news channel.Others i cant say... ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: Mohan
Date Posted: 28/Feb/2007 at 12:10pm
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Reliance dictionary meaning is Confident or trustful dependence.
Would you say that they have lived upto their name.
I would say yes.
------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: Student
Date Posted: 01/Mar/2007 at 10:07pm
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I am new on this forum. Great to be on this forum- a
great learning place about equity investing. Just the thing about reliance and their promoters. Look at the commitment shown by Mukesh Ambani by showing an intent to invest 17000 crores at time when most of the promoters are raising money from the market. As Samir Arora referred to on CNBC - a great bullish signal. |
Posted By: omshivaya
Date Posted: 01/Mar/2007 at 10:36pm
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Yes, that is really a positive sign. But, investing should be based on various factors, though the action above is positive. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: deveshkayal
Date Posted: 07/Mar/2007 at 4:55pm
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IPCL to be merged with RIL. The news which IPCL shareholders have been waiting for. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: deveshkayal
Date Posted: 09/Mar/2007 at 1:51pm
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An irate investor asked Mukesh Ambani about the underperformance of IPCL shares vis-a-vis the market in 2005 RIL AGM. His advice: "You will never regret holding the stock". ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: catcall
Date Posted: 10/Mar/2007 at 10:44am
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The ratio of 5:1 for the IPCL-RIL merger seems to be slightly in favour of RIL as against "market expectations" which was 4 :1 ------------- There are two times in a man's life when he should not speculate-when he can't afford it and when he can-Happy investing! |
Posted By: vishal.sahay
Date Posted: 10/Mar/2007 at 10:53am
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Yes the ratio sof 5:1 means lower equity dilution.
But I could not understand why Reliance Industries wants to keep all the shares to be held in trust in form treasury shares?
Also after the merger of IPCL with RIL the percentage of treasury shares will go up from 12% to 14% so does this 14% form the sharholding of the company or promoters? and since these shares are not entitled to any dividends what could be possible gain in holding these shares apart from monetarising later by selling them either to financial institution or open market? ------------- Vishal |
Posted By: sanjay3
Date Posted: 11/Mar/2007 at 9:17pm
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Reliance plans 10% stake sale to strategic ally BS Reporter / Mumbai March 11, 2007 The move follows IPCL's merger with RIL; the sale is likely to mop-up over Rs 20,000cr. Reliance Industries (RIL), the country's most valuable company, is poised to offer over 10 per cent stake to financial and strategic investors following the merger of Indian Petrochemicals Corporation (IPCL) with itself. Going by the market price of around Rs 1,350 a share, the stake sale is expected to mobilise over Rs 20,000 crore. The shares to be put on the block comprise the current holding of RIL's associates in the company and the new shares that they will receive against their holdings in IPCL. The chunk of the holding of RIL's associates is with Petroleum Trust, a special purpose vehicle created five years ago at the time of the merger of Reliance Petroleum with RIL. Petroleum Trust holds a 7.5 per cent stake in RIL. RIL is, however, not creating any special purpose vehicle for parking the allotment of its associates' holding in IPCL. "The associates will hold the shares for the benefit of all the shareholders of RIL and monetise the economic value at an appropriate time in the future. These shares could be offered to financial or strategic investors in domestic or international markets," a statement issued by the company said. The plan to monetise the holding of RIL's associates puts to rest the speculation on whether the company will extinguish these shares. The proposed merger of IPCL is a part of the restructuring RIL had kicked off nearly a year ago. It began with bringing a handful of subsidiaries under IPCL last year. Last fortnight, Chairman Mukesh Ambani announced subscription of preferential warrants for Rs 16,000-odd crore. RIL is also spinning off its overseas oil and gas projects into a separate subsidiary. "owing to the restructuring, RIL will be better equipped to pursue big overseas plans and monetise the benefit of an extended balance sheet. Its plan to offer stake to investors is aimed at reaping benefit from the restructuring," analysts said. Post merger, the paid-up capital of RIL will go up to Rs 1,453.6 crore from the current Rs 1,393.5 crore. So the promoters' stake, which is slated to go up by 4 per cent to 55 per cent after the warrants issue, will come down. The Life Insurance Corporation holds 4.5 per cent, while the public shareholding is 48 per cent. RIL acquired 26 per cent stake in IPCL in 2002 and increased it by another 20 per cent through an open offer. |
Posted By: Mohan
Date Posted: 18/Mar/2007 at 10:26pm
While the brothers are riding on the Ambani brand name, let us see what they can achieve. They certainly have deep pockets.
------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: India_Bull
Date Posted: 18/Mar/2007 at 5:13am
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The reason that Mukesh is trying to buy retail operations abroad is the arbitrage or the price difference he is looking at. E.g You get Onion at say Rs.100/Kg in Us/Europe. He is trying to build logistics to get the onions from Indian Farmers at Rs.10/Kg and sell in US/Europe at Rs.100/Kg. I read some of his interviews some time back on his long term retail strategy wherein he has mentioned all these dreams.
Believe me if he could do it sky is only limit... ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: xbox
Date Posted: 18/Mar/2007 at 5:35am
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Well, This happens only in India where Refinery company is foraying into telecom, retail, agri etc. etc. Be in developed markets, investors would have thrashed the stock in dustbin. ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: India_Bull
Date Posted: 18/Mar/2007 at 5:42am
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True, In India sub kuch chalta hai !!
Ambanies have proved over a period of time that they can do anything and everything (right from the time when they had upper hand in deciding govt policies to suit their businesses..
One of the recent examples is controversy of Pramod Mahajan and Reliance Infocomm, and the latest move of entertainment tax on lease is killing Retail operators-U know Relaince retail will not get affected by it !!!)
Just hope he will demerge all these businesses one day and unlock shareholder value. (I hope he does that as he is the biggest shareholer in his businesses ) ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: xbox
Date Posted: 18/Mar/2007 at 5:52am
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Just hope he will demerge all these businesses one day and unlock shareholder value.
------------
He will not. Logic is quite simple. One need to wait for next generation for this. Management do not like demerger. Sometimes they are forced to do it. History stands with it, be it RIL demerger, GE shipping etc. etc. ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: deveshkayal
Date Posted: 19/Mar/2007 at 3:46pm
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Some TEDdy was giving us gyan about operations of RIL....this is what i read today....
Every squirt of gas in the Krishna Godavari basin,on the high seas of Bay of Bengal,is beamed live to a phalanx of screens at Petroleum House in Dhirubhai Ambani Knowledge City,Navi Mumbai. "We know of every development at KG on a real time basis," said an RIL official.This tab caused some heartburn initially as technicians at Ground Zero found it intrusive.But soon they understood the efficiency of broadcast advise as it cut through administrative hassles.. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: kulman
Date Posted: 19/Mar/2007 at 4:03pm
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Devesh yaar, kahan kahan se kya kya padhte rehte ho? Keep it up. Your reading habit will take you places.
Ambanis are pioneers & innovators, no doubt.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: Student
Date Posted: 19/Mar/2007 at 9:54pm
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For Ambani doubters here's a article on today's ET front page Ambani Vs Ambani or Ambani & Ambani It is fashionable for Indian media to describe any bickering in the Ambani household as Ambani vs Ambani. For a moment, spare a thought for Ambani & Ambani. If the net worth of the two Ambani brothers is combined, it will propel them to the fourth slot globally in the Forbes list of billionaires and to the No.1 position among Indian billionaires, even ahead of Lakshmi Niwas Mittal. Think about it. Their combined wealth of $38.3 billion will make them the second-richest business family in the world, next only to the Waltons of Wal-Mart whose combined wealth tots up to a staggering $83 billion. As Mukesh Ambani gears up to meet the threat of Wal-Mart in India, he might appreciate the irony. Leave aside the irony, it would have made the legendary Dhirubhai Ambani proud. Strategy gurus around the world may see this as a great opportunity for a Harvard or a Kellogg case study - call it 'Divide And Grow.' It is possible that the emergence of the Ambanis as one of the biggest business families in the world would not have taken place if the two brothers had not split. It's only a matter of time before Ambani & Ambani trounce Bill Gates, Warren Buffett and Mexican billionaire Carlos Slim. Consider: If RIL's joint venture with Dow were to go through and its retail venture takes off, it could easily add a few billion dollars to Mukesh's wealth. And Anil may take the Bulls by their horns with a few bulge-bracket acquisitions in telecom and financial services. For the Ambani combine, the growth in wealth has been astounding so far - since 2002, when Dhirubhai's wealth was estimated at a paltry $2.9 billion, the combined Ambani wealth has galloped over 13 times to $38.3 billion this year. In the same period, Bill Gates is richer by a mere $4 billion - that's less than 10%. And Warren Buffett, the Sage of Omaha, is up a modest 50%, from $35 billion in 2002. There's another big reason why the Sultan of Software and the Sage may not be able to keep pace with the brothers. Gates and Buffett have committed a substantial part of their wealth to charity. Add to this the incidence of estate duty in the US, and Gates, Buffett and the Waltons are bound to drop places in the Richie Rich list in time to come. LN Mittal, being an Indian, may not be subject to estate duty and hence find it easier to stay in the reckoning for the top slot. So give it another 4-5 years and Ambani & Ambani could well be the richest family in the world - at the very top of the Forbes list. It will truly be a tribute to what we at ET call the Global Indian Takeover - or, better still, the World At Your Feet. Remember what Mukesh Ambani said, addressing RIL shareholders at last year's AGM, "This strategic move has resulted in incremental shareholder value of nearly Rs 46,000 crore ($10 billion), representing the market capitalisation of the demerged entities when listed. This is undoubtedly the largest shareholder value unlocked in Indian corporate history." Ambani Sr later told ET in his first exclusive media interaction after the split, "The easiest way to look at it is that it's a win-win for both groups (RIL and R-ADAG)." ET has always aspired to bring the two Ambani brothers together - as readers of ET would remember, we made them shake hands at the height of the Reliance split at the ET Awards For Corporate Excellence 2005-06. They could be running different businesses, but instead of working at cross-purposes, they should enhance the wealth of their shareholders - and, very soon, become the richest family on earth, even ahead of Bill Gates. The recent Forbes list of billionaires places Mukesh Ambani and Anil Ambani at the 14th and 18th positions with individual net worth of $20.1 billion and $18.2 billion respectively. Their combined wealth of $38.3 billion will take them to the fourth slot, behind Bill Gates ($56 billion), Warren Buffett ($52 billion) and Carlos Slim ($49 billion). It will place them ahead of Ikea's Ingvar Kamprad ($33 billion) and steel king LN Mittal ($32 billion). The growth of the two Ambani brothers after the split has been mind-numbing. Here's more fodder for Divide And Grow: In 2002, Forbes had ranked Dhirubhai Ambani at number 138 in the list of billionaires with a net worth of $2.9 billion. In 2003, when the two brothers were listed together for the first time, their net worth was $2.8 billion and were ranked at number 123. Even when they were listed together for the last time by Forbes in 2005, they were ranked No.60 with a net worth of $7 billion. The demerger and the subsequent listing of companies has resulted in five-times increase in the combined net worth of the Ambani brothers as well as tremendous increase in market cap of both group companies The world's second-richest business family, after the Waltons, hails from India - and their family members live under one roof, at the famed Ambani residence 'Sea Wind' in South Mumbai. Children of both brothers wait their turn to kiss their grandmother goodnight, the one person who's made sure that Ambanis stay with Ambanis. So far. Forbes should take note: it's not easy to establish the wealth of Indian families, many factions of which still live under the same roof, share the same kitchen, pet the same dogs... And their children still play with each other in the backyard enjoying the Sea Wind and often, oblivious to business realities. For all you (and Forbes) know, LN Mittal's wealth may actually go up by a few more billions if you were to add the net worth of his brothers based in India. From here, there's only one way for the two Ambani brothers to go - up. It's time they looked beyond competition, beyond rivalry, beyond business. Even beyond what's described as the highest point in Maslow's hierarchy of needs - self actualisation. More simply, towards a richer tomorrow, not defined merely in terms of the billions they make. Ambani Vs Ambani or Ambani & Ambani |
Posted By: Mohan
Date Posted: 19/Mar/2007 at 10:40pm
The article is mentioning clearly IF Reality is something else
An old saying comes to mind " If wishes were horses beggars would ride"
(No Disrespect meant to anyone.) ------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: xbox
Date Posted: 19/Mar/2007 at 5:41am
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Both ambanies are making personal wealth by doing ambitious projects funded from listed entities. MA is using RIL cash to venture into retail, agri, bio, SEZ et. etc. where as younger bhai is one step ahead. He is using REL and RCap Cash to buy anything and everything (he likes). Sonata investments, which is subsidiary of REL has investment into textile companies. Oh!! God. Can't people see the game..
RCap is investing into courier company to tour 'n travel company. RIL is not hiving-off it's gas 'n oil exploration business (I envisaged long back in the forum).
Best way to do it by making a venture company and funding from there like ICICI bank. Their ICICI venture is quite active in many sectors. They not only fund other business but also take control of management.
Some of the biggest companies in India are biggest chor to minority shareholders. ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: deveshkayal
Date Posted: 20/Mar/2007 at 9:55pm
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Broking house, UBS Investment Research has recommended buy rating on Reliance Industries with a target of Rs 1701. UBS Investment Research report on Reliance Industries: IPCL merger to add value IPCL to be merged with Reliance Industries (RIL) Indian Petrochemicals Corporation Ltd's (IPCL) merger with RIL has been approved by the Board of Directors of both the companies. The proposed merger ratio is 1 share of RIL for every 5 shares of IPCL. It implies a 4.3% dilution in RIL's equity. RIL's associate companies hold 47.3% in IPCL. RIL would benefit due to savings on sales tax The merger would benefit RIL by reducing sales tax outgo on products supplied to IPCL. RIL supplies naphtha from its refinery for IPCL's Baroda cracker, gas from PMT (where RIL has a 30% stake) and PTA for the recently acquired polyester units. We believe tax benefits would be upward of Rs4000 mn p.a. IPCL acquisition cost at lower end of regional valuations RIL will be acquiring IPCL at EV/t of $2061/t of ethylene capacity, PE of 6.5x FY08E and EV/EBITDA of 4.2x FY08E. The acquisition cost of IPCL for RIL at $1.8 bn for 0.875 mmtpa of ethylene capacity compares favourably with new ethylene crackers being set up globally. Valuation: Reiterate Buy rating and Rs1,701 price target We base our price target for RIL on a sum-of-the-parts valuation, including the potential upside in E&P and retail. We continue to value the existing businesses on regionalEV/E multiples. With only 4.3% equity dilution and ~12% addition to PAT in FY06 and FY07 we believe IPCL's merger will be earnings accretive for RIL. Source :- Moneycontrol ---------------------------------------------------------------------------------------------------------------------- Is Sonata Investments part of REL or Rel Cap ? If it is part of REL then it makes no sense. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: ramki830
Date Posted: 20/Mar/2007 at 11:55pm
Yes. There lies the difference between a "Tax Avoiding" Family Run Enterprise (Reliance Group) and a "Professionally Run" Enterprise (ICICI). Ambanis have always worked their way through two things (paying lowest possible taxes and diliuting equity whenever needed but ensuring that promoter stake is not affected, thru various means).
If you analyse the equity history of Reliance Industries (erstwhile) between 1985 and 1999, u can find that the company's equity base has grown from 50 odd crores to nealry 800 crores - but there was only one 1:1 bonus (in 1997). But same time, the promoter stake has remained at 40-50% range. How?
At same time, Reliance has given returns to shareholders to some extent, we cant deny that.. afterall there are so many companies today, which will not exist tommorow, but Reliance will be around here tommorow. So that is our consolation.
Going forward, one should be most careful about Mukesh. He is following his Father's plan of listing subsidaries at high priced IPOs and eventually merge them with main company and in the end, the investors in IPOs of subsidaries dont get really much. Mukesh is the more powerful of the two brothers (political clout plus media power plus intrinsic strength of RIL), so he will get away with such dilutions easily.
Anil may be comparitively checkmated because of his lack of political clout plus more media exposure on him - in anycase, he has 4 listed companies with him and he has chosen 1 of them - RCapital to play with investments, chosen R Energy to invest in huge futuristic projects (Mumbai Metro), Adlabs to play in Media/Entertainment - R Com may be for any global ambitions.
To conclude, we can say that with Ambanis - They have a track record of building competitive and scalable businesses, but they are strictly a "Promoter First" company, and they dont hesitate in doing meanest tricks to deny Govt its due tax revenues and minority shareholders their due share of benefits.
Overall, after studying their stocks for nearly 10 years, i would still say that they are investment worthy - but only in bear markets/ low valuations. Anyone who invested in Reliance group cos in 1998 bear market, or 2003 or 2005 would hv gained immensely. But someone who invested in their IPOs or in their shares in peak of bull markets wont have gained much. Reliance is good investment, provided one invests them at low valuations.
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Posted By: omshivaya
Date Posted: 20/Mar/2007 at 12:47pm
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Excellent points Jagannath ji...very very vital. Most know it but only some say it and an even fewer ones actually deny it all. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 20/Mar/2007 at 10:12am
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If you analyse the equity history of Reliance Industries (erstwhile) between 1985 and 1999, u can find that the company's equity base has grown from 50 odd crores to nealry 800 crores - but there was only one 1:1 bonus (in 1997). But same time, the promoter stake has remained at 40-50% range. How?
________________________________________________________
Excellent insight. Never thought about it in that way and also the argument of Reliance being a promoter first company is absolutely bang on. What surprises (perplexes) me is that none of the institutions/MF's ever say anything against Reliance. SUrely they have got the returns but remember DhiruBhai's placement to UTI sometime in 1994-95 at Rs 365. It took years for UTI to get back that price but silence prevailed.
WHile Reliance can do all that it wants to and get away from it the fact remians that they are reckless when it comes to equity dilution when it happens that way they are kind of a bania company which says "paisa milta hai toh utha lo - dekha jayega. Now they never dilute equity in bear markets but as soon as the markets reach some sort of a bullish phase we know which company could do a mega IPO. Don't we? ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: johnnybravo
Date Posted: 21/Mar/2007 at 6:23pm
Well said Vipul. I don't know, why people are so much baised towards the Ambanis. On the face of it, they seem crooks who time and again have taken the shareholders, govt, ministers everybody for a ride. I just thought of the illegal international call routing that RCom (before demerger) was doing. The media had reported that the Reliance top brass was well aware of this but 'they' managed to keep the issue at bay. Just like any other political scandal, the biz houses of India have time and again kept their misdeads under wraps.... |
Posted By: xbox
Date Posted: 21/Mar/2007 at 6:12am
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why people are so much baised towards the Ambanis.
-----------------
It is pseudo India Index stock. Also it has some of the most stable business and some of the most exciting ventures. Promoters are quite ambitious and has impeccable execution history. All of these attract big and small fish to RIL. Afterall, one wants munafaa. ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: ramki830
Date Posted: 24/Mar/2007 at 9:19pm
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Yes , Vipul has rightly said. Ambanis (Mukesh and even Anil to a good extent) have a great track record of "Think Big, Act Fast, Execute Perfect"... be it their refinery , exploration , telco or even their Mutual Fund/Adlab stuff, they have a record of doing things. I guess that it has something to do with the way they recruit top level staff. (Reliance recruited large no of experienced hands from ONGC b4 they started exploring Gas in KG Basin, and they hv lot of BSNL old hands too i heard). So ultimately, markets must reward the performers and so Reliance share has given nearly 18 fold return since Oct 1998 . No denying for sure.
So I too agree that we should not make Reliance Scrips as untouchable and we must consider them as investment worthy - but only at right price. We must be extra careful in investing in Reliance Cos at Bull Market/High PE or EV/EBITA multiples but instead look for bad news and invest the scrip. I hv been studying this group for nearly a decade and now fully convinced that one can invest in Reliance when bad news is around and/or group is involved in some controversy/issue- like in Oct 1998 (UTI crisis/refinery worries) , then 2001, 2003 April (Iraq war worries), Nov 2004 - Nov 2005(the split between brothers) .
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Posted By: ramki830
Date Posted: 24/Mar/2007 at 10:13pm
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And to add - My view on Reliance Group Cos right now 1. RIL - Doing exceedingly well , firing on all cylinders - Refining, Petrochem and Exploration/Production and Retail. But RIL is now in investment phase (planned acquisitions, retail expansions will such billions of dollars of capital). Also company is very heavily priced, at nearly 40 billion Dollars in MCap (which is big even by int standards). So RIL will be a market performer only. Remember that RIL did not correct much in last few weeks, so RIL share is not a pressing buy. One can wait for better prices. I would like 1000 or below levels , since i believe we should be extra careful with RIL.
2. R.Energy - Has ambitious plans , is part of Mumbai Metro etc. Good. But lot of operational problems in terms of their distribution cos still in red, delays in UP Power project etc. So expecting lower prices in this scrip. Avoid right now.
3. R.Capital - Surely it is rocking in terms of leadership in MF business, gaining share in insurance (without any foreign tie up), and also picking stakes in many small caps. I would say we should watch this counter. MCap is pretty high (14000 crores is bit high for a non banking financial concern) so bit expensive now. So we can watch. I feel that, Insurance business growth will drive the co either way.
4.Adlabs - Doing lot of interesting thing, but entertainment business has lots of entrenched and powerful players and I think we should wait and watch, and see how they fare in next 2-3 years.
5. RComm - The Telco created out of RIL shareholder wealth. I think that RComm is a very sensible and viable business and I do feel that this is a rightly valued company in a right sector. If RComm plays the GSM business correctly, the company can really go places. The company does appear to be very reasonably valued among all Reliance group cos .
6. R Petroleum - The refining arm of Mukesh Ambani. I feel that eventually it would get merged with RIL with terms favouring latter. Past history adds strength to this view.
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Posted By: catcall
Date Posted: 09/Apr/2007 at 9:50pm
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I was listening to CNBC's own analyst reporting on the proposed commerical distribution of gas and the distribution on the same by Reliance and was shocked by the inaccuracy of the report. The reporter claimed that the commerical production of the RIL at full capacity would be available by 2009 and this gas would be fully utilised since the government of India has made it mandatory for the fertiliser units in India to convert to Natural Gas within 3 years.
As someone who is directly involved with this issue , i can tell you that the facts of the matter are quite different. First this holds only partly true, since only Naphta based plants can convert in a period of three years, oil based (LSHS) plants would take longer. Secondly, for these plants the financial viability and economics of this whole thing are still to be worked out. During our meeting with the concerned ministry officals in Delhi a couple of months back, no agreement was reached on who would foot the bill of this conversion, what was only agrreed upon was that "A proposal be put up". The amount involved would be a huge amount (to cite an example, a conversion of a standard 1350 TPA ammonia plant to LNG would take up a cool 800 to 900 crores!!)
In case the govt. chooses not to foot the bill, the conversion would become non-viable for most of the companies, with the IRR becoming viable after as many as 15 to 20 years.There is also the issue of lack of clarity in the fertilzer policy in the long run and these conversions would take much longer than 3 to 4 years (if at all they take place!!). In fact , some of this companies have still not intiated the process of conversion so there is no question of the conversion being completed in three years.
The issue is not how, or , if this will effect RILs plans- for all we know it may not. The issue is that we would generally expect a bit more of accuracy in the reports of CNBCs own analysts ( not the TAUs they we often refer to !!), and such findings are an eyeopener in the trust with which people view such reports . This only lends credence to Warren Buffets's theory (if at all it were required!) - "Invest only in Businesses you understand"!
------------- There are two times in a man's life when he should not speculate-when he can't afford it and when he can-Happy investing! |
Posted By: kulman
Date Posted: 09/Apr/2007 at 10:07pm
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Thanks CatCall for the detailed information. Really appreciate your indepth knowledge & your willingness to share it.
As regards inaccuracy on behalf of that reporter, difficult to know whether it was an oversight (or was it intentional?). Anyhow, it's always better to crosscheck with the companies involved, if possible.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: BubbleVision
Date Posted: 09/Apr/2007 at 10:31pm
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Thanks CatCall......your willingness to share knowledge with all, is there to see !!! ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: Mohan
Date Posted: 09/Apr/2007 at 10:43pm
How much does a new plant with similar capacity cost ?
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Posted By: kulman
Date Posted: 09/Apr/2007 at 10:54pm
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CatCall....one more thing... While replying to Mohan jee's question, I request you to also give us names of contractors/major equipment suppliers who are experts in this fuel conversion business.
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: catcall
Date Posted: 10/Apr/2007 at 6:45pm
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in reply to your query, mohanji, a direct co-relation with a green-field plant would not be appropriate, since these companies already have existing gassification plants which would be rendered useless. Such an investment would be at least five to seven times the conversion cost and plus the added advantages like deprication of the plant, pre-operative expenses and interest would be lost. kulman, this kind of job would have to be executed by a consortium or a joint bid, would not be possible for any single company to execute it. Engineering /technology /supply and construction .Companies like Linde, Humphrey and glasgow, Haldor Topsoe etc. would be providing the technology while the susquequent activites would come from companies like L&T ------------- There are two times in a man's life when he should not speculate-when he can't afford it and when he can-Happy investing! |
Posted By: vip1
Date Posted: 22/May/2007 at 3:50pm
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The largest cap stock( Reliance) which at TED has few followers has defied all laws of a large cap and given phenominal Returns in the last 12 months.
I think it deserves
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Posted By: BubbleVision
Date Posted: 22/May/2007 at 4:16pm
vip1...Some TEDies are certainly "Following" it. ------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: vip1
Date Posted: 22/May/2007 at 4:27pm
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Good Bubble ,
Enjoy the ride
Yeh to abhi Trailer Hai Picture abhi aani Hain!!!!
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Posted By: go4lalit
Date Posted: 22/May/2007 at 4:45pm
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Some people say you can't make a multibagger from a large cap...
Reliance is up almost 5 times in last 2 years (pre-spilt)
I see RIL being a Fortune-10 company in the next 5 years....
Enjoy the ride......
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Posted By: BubbleVision
Date Posted: 22/May/2007 at 4:49pm
vip...If this is the trailer...then I would perfer leaving the hall just before the movie ends. "Last Ke Dishum-Dishum mein". Because after the end, there could be a "Horror Show", which I would NOT like to be a party too.
I am sure that My "Bubble-O-Meter" will get me out!!!
------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: deveshkayal
Date Posted: 22/May/2007 at 10:49am
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Last week,single largest individual investor in RIL Anil Ambani met RJ,RD,RK Damani,Nimish Shah,Ramdeo Agrawal and said RIL holds far more gas than what has been already certified of 80mn cubic meters per day.He said it could be more than 200mcmd.The gas finds will be commercially exploited by the second half of 2008 and will see India emerging as the cheapest producer of fertilisers and electricity in the next 3-4 years.
Kotak in a stinging report on "RIL-What to do now?" said it just cannot understand the rise in RIL's share price and put a target of Rs.1375.
Source: DNA ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: deveshkayal
Date Posted: 27/May/2007 at 11:15pm
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Mukesh Ambani becomes trillionaire; Anil close behind (PTI)
A sharp surge in share prices of his group companies has earned Reliance Industries Chairman Mukesh Ambani a rare distinction of being the only trillionaire in the country with over Rs 1,00,000 crore of wealth through his shareholdings.
Younger brother Anil is also trailing behind closely with close to Rs 90,000 crore of wealth in the stock market through his holdings in various group companies ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: deveshkayal
Date Posted: 28/May/2007 at 7:34pm
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Kotak view on RIL Retailing initiative
Land purchase cost 150bn
(50% of stores land leased @ 4% of revenues,50% of stores land purchased at Rs.3750/sq ft.
ROCE 15%
(Pantaloon's ROCE will be about 14-15% in the next few years)
Retailing area 80mn sq ft
Retail valuation Rs.112/share ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: pramodjain
Date Posted: 05/Jun/2007 at 11:30pm
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The gClutch of 24 SEZs cleared overnment on Tuesday granted formal approval to 24 special economic zone (SEZ) proposals that included Reliance Industries’ 440 hectare zone in Gurgaon and the GMR group’s airport-based export area in The board of approval, the nodal authority mandated to examine proposals for such zones, also granted approval in principle to Rewas Port Trust’s 2,850 hectare port-based export area at Rewas in Commerce secretary GK Pillai said the board considered 44 proposals and 24 of them received formal approvals. 9 proposals received approvals in principle and the board deferred a decision on the remaining 13. Special economic zone proposals go through a three-stage process. They are first considered for approval in principle based on the merits of the applications, followed by a formal approval and finally a notification. The Rewas port economic zone will be strategically located because of its proximity to the The board deferred a decision on information technology zones of DLF, Falcon and Perfect in Noida in Uttar Pradesh near The state government had withdrawn the Anil Ambani group's proposal for a special economic zone in Noida. The board approved the GMR group’s proposal for a 101 hectare zone near the So far, the government has notified 114 zones, and 150 cases where land has been acquired are pending before the board. Source: http://www.hindustantimes.com/Search/Search.aspx?q=Gaurav%20Choudhury&nodate=1 - Hindustan Times mailto:[email protected]?Subject=Clutch%20of%2024%20SEZs%20cleared - Is there any trend in the news, where we can see spot a hi speed co there ? |
Posted By: reetesh
Date Posted: 29/Jun/2007 at 2:12am
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This is after all my Viv Richards category stock!!! That is the reason why... ------------- When going gets tough, that’s when tough (people) gets going. |
Posted By: deveshkayal
Date Posted: 16/Jul/2007 at 11:00pm
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Margin woes delay Reliance retail plans (NDTV)
It is not just escalating real estate costs but also supply hurdles that are causing delays for Reliance retail's hypermarket and apparel plans. Big does not always get you the best bargains and the heat is on for the Reliance retail with competition increasing everyday and margins under presser. Now comes a delay in executing its plans for both hypermarkets and its apparel brand. Hypermarkets, which were to be launched in April will now come up end July while the apparel brand will come to the market by November, it was earlier planned for August. According to sources, what making it tough for the Reliance is negotiating for lower prices for household products and cloths with manufacturers. And that is why the company wants to focus on private labels, to begin with along with more local garment brands than go for luxury and global ones. "We will be focusing on domestic brands and private labels," said Raghu Pillai, CEO, Reliance Retail. New format stores The hypermarkets will come up by the end of the month with Ahmedabad as first stop. According to sources new format stores Reliance Super will offer grocery, health & beauty, clothing and stationery, but no fruit or vegetables, in a bid to appease the protestors. These stores will range from 4,000-10,000 square feet. While there are no protests at the digital stores expensive land deals have also put expansion on hold. Sources say that the average rate of real estate is 125 sq feet while the company makes just about Rs 200 a sq feet. Add wages and promotion costs to that and there is hardly any margin left. What is clear is that even though low margins are a reality, no one expected real estate costs to hit Reliance so hard. Reliance was surely hoping its size and scale would give it the muscle power to get better bargains but since the entire sector is struggling, looks like no one is taking chances. ------------------------------------------------------------------ It wont be easy for Reliance while no one can doubt MA's execution skills. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: deveshkayal
Date Posted: 17/Jul/2007 at 11:11am
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Here's how MA compared the secod refinery at Jamnagar to RPL shareholders,to give them a sense of the magnitude of his gigantic project. "The civil concreting works at the site will consume cement equivalent to 35CN towers in Canada,the worlds tallest building.The structural steel eing used is enough to lay railway tracks from Kashmir to Kanyakumari.It uses 5200 km of pipes,equivalent to twice the length of the Ganga and the power and control cables of 11000 km is enough to go around the moon twice."
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RIL holds 75% in RPL..It makes sense to hold RIL rather than RPL.. ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: basant
Date Posted: 17/Jul/2007 at 11:28am
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Absolutely. RPL was listed to highlight the value of RIL's investment in RPL but RIL is a better bet compared to RPL. While all this is fine stock prices do not move on the volume of material used in cosntructing industries. There is already a market cap sitting against all those cement and power and cables. Prices move on EPS/RoE and growth rates and that is what investors should bet on.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: CHINKI
Date Posted: 24/Jul/2007 at 10:09pm
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THE OTHER SIDE OF SEZS
We don't want Reliance to colonise us, say farmers MUNDHA KHERA, INDIA: It's a hot, humid Sunday morning in northern India, but the oppressive heat does not deter a group of about 15 farmers from trudging door-to-door, offering advice and sometimes warnings. "Do not sell your precious land. Even if you are offered millions of dollars, do not sell. It is your only source of livelihood," Mahavir Gulia, the leader of the group, tells a villager in Mundha Khera, 100 kilometres (60 miles) from New Delhi. FOR FURTHER DETAILS READ HERE: %20http://economictimes.indiatimes.com/News/Economy/We_dont_want_Reliance_to_colonise_us_say_farmers/articleshow/2229137.cms - ET ------------- TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO |
Posted By: CHINKI
Date Posted: 24/Jul/2007 at 11:56pm
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http://www.livemint.com/2007/07/24094516/Reliance-Industries-planning-f.html%20 - Reliance Industries planning fertiliser plant, says report
This has always been the case with RIL. Very focussed, Long Term Vision, Agressive, & doesn't change their plans. Infact they change everybody else's plans. Imagine one refinery at Jamnagar, solved LPG availability problems in this country once for all. Some of the PSUs plans for constructing refinery are yet to come out of the planning room even after 10 years. Their venture into oil discovery with latest technologies should solve our requirement of crude oil within next few years. As of now, we import more than 75% of our requirement. Inspite of flush with funds, ONGC couldn't do better because of Govt's inaction. Now they are planning to venture into Fertilizers. This would be very good for our Agriculture and particularly for Farmers.  ------------- TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO |
Posted By: Mohan
Date Posted: 24/Jul/2007 at 2:38am
Chinkiji,
This venture into fertilizers will also benefit retail as these same farmers will sell to Reliance Retail. Ek teer do nishane
 Backward Integration Relaince Ishtyle.
Also potential consolidation of Fertilizer industry. Future market leader Reliance Fertilizer ??? ------------- Be fearful when others are greedy and be greedy when others are fearful. |
Posted By: kulman
Date Posted: 24/Jul/2007 at 7:51am
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Backward Integration Relaince Ishtyle.
Also potential consolidation of Fertilizer industry. Future market leader Reliance Fertilizer ???
------------------------------------------------------------------
Hey bhagwan! Another tagline: "Mere papa ka sapna, har khet mein Urea apna!"
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: CHINKI
Date Posted: 25/Jul/2007 at 12:58pm
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Mohan,
Absolutely right. I did not looked it from that angle. Infact ITC are doing it already through their e-choupals. They give fertilizers, hybrid seeds and other materials (sourced from third parties) required for farming to farmers. In turn they will come back with their produce. ITC will buy that and then they can go buy from Choupals their other requirements. So RIL may start doing the same. Since their Retail formats are going to be big & huge in nature, they may make farmers to buy RADIO TO LISTEN, TVS TO WATCH, AND SO ON. So with RIL, "TEER EK HAI, LEKIN NISHANE BAHUTH HAI" ------------- TOUGH TIMES NEVER LAST, BUT TOUGH PEOPLE DO |
Posted By: chic_1978
Date Posted: 25/Jul/2007 at 1:32pm
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Hey bhagwan! Another tagline: "Mere papa ka sapna, har khet mein Urea apna!"
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Kulmanji try film scripting ....ur sense of humour is amazing ------------- happy & wise investing |
Posted By: India_Bull
Date Posted: 25/Jul/2007 at 1:36pm
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Kulmanjee,
I wonder Reliance has not looked at some areas (Chaddi, Baniyan (is it thru Max?), Toothpaste, soap and shampoos, software, airline, hotels,Dance bars etc etc..
Then he will have a tag line,
Mere papa ka sapna, sab ka paisa jeb main apna ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: kulman
Date Posted: 25/Jul/2007 at 10:46pm
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I wonder Reliance has not looked at some areas (Chaddi, Baniyan (is it thru Max?), Toothpaste, soap and shampoos, software, airline, hotels,Dance bars etc etc..
Mere papa ka sapna, sab ka paisa jeb main apna ---------------------------------------------
ha ha ha !
Sandeep jee
The above post of yours has given lots of 'ideas' to 'shaitani dimaag' for few more taglines!!!. But I won't post them here keeping in view 3 Ds: Decorum, Dignity & Devesh !!!
Ha ha ha  ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: deveshkayal
Date Posted: 25/Jul/2007 at 10:35am
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Excellent article in Business India on KG basin details. Some key points: Owing to the tight market for rigs,RIL had to pay a hefty $340000 a day or $248 million for two years from Feb 2007 for a semi-submersible like the C. Kirk Rhein Jr.
Our charged for suppliying the subsea equipment is about $600 million,says Dr. S.Rama Iyer, Executive Chairmen of Aker Kvaerner in India.
"The total cost of the project upto the transport pipelines is $5.2 billion." says Subhash C. Varma,president for development ofthe petroleum business of RIL."Of this around $1 bn would be for drilling,around $600 mn for te onshore gas seperation plant and $3.6 billion for the offshore installations."
The daily cost for the drilling operations is around $750000.
While the present development plans call for a production of 80 mcmd, the company is leaving provision to raise gas production by another 50% to 120 mcmd.(Remember marathon Ambani meet with RJ,RD,RKD,etc)
The projected gas production of 80 mcmd is to come from 18 gas wells, drilled at water depths ranging from 550 m to 1250 m. Further finds are possible since only part of te 7600 sq km KG D6 block awarded has been explored.Of the production of 80 mcmd, 5% would have to go as royalty to government. Around 1000 cu.m of gas have the same energy as 0.9 tonnes of oil. Thus 80 mcmd of gas would be around 72000 tonnes of oil a day or around 540000 barrels of oil a day.This is roughly equal to 20 mn tonnes of oil a year, just a little less than we get from our largest oil field at Bombay High.
More coming soon..watch this space... ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: deveshkayal
Date Posted: 27/Jul/2007 at 10:56am
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Continued.....
The company is in for a cash bonanza. At $4.50 per million BTUs, the roygh rate of price discovery at which it hopes to sell the gas it will earn $4.73 billion a year if it produces 80 mcmd. If however, it has to sell the gas at $2.34 per million BTUs, which it has contracted with NTPC and Rel Energy, its annual revenue from the same volume of gas would be $2.45 billion.
Once Reliance recovers between one and half times to two and half times, its investment of $5.2 bn it has to share the balance production with the govt. in a production sharing arrangement. Production sharing in most gas finds world wide in recent years means the govt. gets 33% to over 90% of the "profit" oil.
More coming soon..... ------------- "You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beat the guy with a 130 IQ. Rationality is essential"- Warren Buffett |
Posted By: India_Bull
Date Posted: 28/Jul/2007 at 12:45pm
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Reliance has come up with excellent performance this quarter.
For details,pls refer,
http://www.ril.com/rportal/jsp/eportal/ListDownloadLibrary.jsp?DLID=865 - http://www.ril.com/rportal/jsp/eportal/ListDownloadLibrary.jsp?DLID=865 ------------- India_Bull forever Bull ! www.kapilcomedynights.com |
Posted By: kulman
Date Posted: 28/Jul/2007 at 11:04am
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Yes, Viv Richards at his best!
Reliance Industries said its first quarter net profit rose 28.2 per cent, led by a record high gross crude refining margin of $15.4 a barrel, up from$12.4 per barrel a year ago.
Net profit for the quarter touched Rs 3,264 crore compared withRs 2,547 crore for the same the year-ago quarter. The company attributed its higher margins to the complex configuration of its refinery, which can process both heavy and sour crude. The company was thus able to process four new crudes procured at a substantial discount and this, along with its logistical infrastructure that reduces freight costs, helped it boost realisations. Exports were higher by 30 per cent, ..........EBITDA was 23 per cent higher, at Rs 5,282 crore (Rs 4,281 crore). The net operating margin for the quarter was 18.5 per cent (17.3 per cent). RIL was able to pass on the increase in polyester and polymer margins, made possible by strong demand from the end user segment.. Source: http://www.thehindubusinessline.com/2007/07/29/stories/2007072951230100.htm - HBL ------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: ramki830
Date Posted: 29/Jul/2007 at 4:56pm
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Indeed RIL results are above my expections too...
Just think about this... annualising the Quarterly results, we get RIL's annual profits in the range of 12000 plus crore Rs... now RIL's MCap was less than 12000 crore Rs , some 9 years back.. unimaginable right? That is the power of growth, consistent growth. Identify such companies at early stages and win the game.
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Posted By: vip1
Date Posted: 29/Jul/2007 at 5:00pm
| By 2009 , Reliance will almost double its profits to around say 25000 crores , with the Refinery and Gas fields coming into play Reliance can easily Reach Rs 4000 ( Double from here). |
Posted By: kulman
Date Posted: 29/Jul/2007 at 5:05pm
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Yeah! The way these two brothers are growing, few years down the line one shouldn't be surprised to see Indian currency bearing Dhirubhai's smiling face instead of Mahatma Gandhi!
------------- Life can only be understood backwards—but it must be lived forwards |
Posted By: vip1
Date Posted: 29/Jul/2007 at 5:09pm
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Yeah! The way these two brothers are growing, few years down the line one shouldn't be surprised to see Indian currency bearing Dhirubhai's smiling face instead of Mahatma Gandhi!
Nahi to Ashok Chakra par 3 shero Ki Jagah 3 Ambani Dikhenge.
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