RIL strikes lifetime high in firm market

India's largest private sector company Reliance Industries (RIL) extended gains to strike a fresh an all- time of Rs 1,874. The index heavyweight was now up 2.8% to Rs 1,872, on 5.8 lakh shares. The Bombay High Court on Wednesday, 18 July 2007, refused to stay an interim order barring Reliance Industries (RIL) from selling gas from its KG basin field to any other firm except Anil Ambani's Reliance Natural Resources (RNRL) and state-run NTPC. A division bench of Justices J N Patel and Ahmed Sayed also adjourned by eight weeks the hearing on RIL's appeal against the previous interim order.

The court, however, said the government can go ahead with the process of fixing of gas price as per the contract for the field, without any prejudice to either party.

RIL's adavancement

RIL advances on roping in US partner for new project

Reliance Industries advanced 2.55% to Rs 1374.20, on reaching an agreement with US-based Rohm and Haas Company for the joint construction of an acrylic-monomer complex.The counter clocked 5.06 lakh shares on BSE. It had also surged to a high of Rs 1420 in opening trade.

Index heavyweight Reliance Industries (RIL) has a huge 11.34% weightage in the 30-member Sensex club, second only to IT bellwether Infosys Technologies, which had 12% weightage on 21 March 2007. The weights assigned to individuals are in terms of market capitalisation, which, in turn, changes on the basis of daily changes in share prices.

This proposed facility will have the capacity to make approximately 200,000 tonnes of acrylic acid and its esters annually. While the key objective would be to serve the domestic market, the complex could also export acrylic acid and derivatives.

Materials from the facility are intended to serve as building blocks for environmentally advanced products for paints and coatings, packaging adhesives, detergents, textile and construction materials. The new facility is expected to spur development of super absorbent polymers, used primarily in the manufacture of baby diapers.

The proposed acrylic acid plant is expected to be world-scale, and will be located at a site with world-class infrastructure using Rohm and Haas' technology.

Meanwhile, RIL has asked the government to convert its existing refinery at Jamnagar into an export-oriented unit (EoU). Reports add that the EoU status will mean RIL would not pay the 5% import duty on crude oil, resulting in lower cost of production of petrochemical feedstock naphtha.

This will entitle the company to various tax exemptions, including automatic duty-free import of crude oil. Also, RIL will be entitled to duty-free imports of equipment if RIL was to expand or upgrade the refinery.

Although details of the tax breaks are not fully known, it is estimated the conversion to EoU status would extend the tax holiday for the refinery. A seven-year tax holiday for refineries, which the Jamnagar refinery enjoyed, is set to end in 2007 and the conversion to an EoU will give them a tax holiday on export earnings for at least two more years.

In 2005-06, RIL exported 10.84 million tonnes of products for $5.50 billion to become the largest Indian exporter. It is estimated to export 17.84 million tonnes of petroleum products this fiscal for over $10.3 billion. A EoU enjoys 100% exemption on profits under Section 10B of the I-T Act.

RIL was eligible for tax breaks on its earnings under Section 80(i)B of the I-T Act, which grants 100% tax exemption to refineries for seven years once they start production. By morphing into an EoU, the refinery would get 100% tax exemption on its export earnings.

RIL will, however, have to pay the minimum alternative tax (MAT) as it has been extended to EoUs in the 2007-08 Budget. Moreover, RIL may stand to reap huge gains if the EoU scheme is extended beyond 2009. As of now, the EoU scheme is set to be phased out by 2009, which will bring to an end all such tax exemptions.

Earlier this month, Reliance Industries has made two new discoveries in the east coast blocks. These explorations are in the KG-D6-P2 in block KG DWN 98/3 (KG D6), and in the NEC 25 A5 in block NEC OSN 97/2 (NEC 25). The commercial viability of the above discoveries is currently under evaluation.

These recent discoveries demonstrate the further upside potential of the blocks in the Krishna-Godavari and Mahanadi basins.

IPCL Slips

The market was buzzing with the news of the merger of RIL with IPCL and the possible swap ratios,but RIL announced the 1:5 swap ration on saturday(10 March 2007).So shareholders will get a share of Reliance Industries (RIL) for every five they hold in IPCL.

The IPCL scrip had spurted over the past two days on expectations of a favourable ratio of merger with Reliance Industries. From Rs 231.65 on 7 March 2007, it had spurted 15.9% to Rs 268.60 by 9 March 2009 after RIL announced after trading hours on Wednesday (7 March 2007) that it was considering a merger of IPCL with itself.
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Trading confined to a range

The market was range bound in morning trade. The various constituents of the barometer index, the BSE Sensex, displayed a mixed trend. While cement and auto pivotals were subdued and ONGC had dropped, Reliance Industries (RIL) held firm.

The market-breadth, which was positive in early trade, turned negative. Against 1,388 shares declining on BSE, 859 rose. A total of 71 shares were unchanged. Losers outpaced gainers by a ratio of 1.6:1. In early trade, the breadth was strong with an advance-decline ratio of 1.4:1.

At 11:22 IST the Sensex was up just 9 points, at 14,412. It had moved between a low of 14,385.22 and a high of 14,466.76.

SBI firm on hardening PLR
State Bank of India rose 0.49% to Rs 1137, as the state-run bank has raised its benchmark prime lending rates 75 basis points to 12.25%.As many as 71,999 shares were traded on the BSE.The scrip has been declining since the beginning of December 2006. From Rs 1360.20 on 1 December 2006, it declined amid some appreciation en-route to Rs 1101.25 by 14 February 2007, only to appreciate to Rs 1130.70 by 19 February 2007.

At the current market price of Rs 1137, State Bank of India trades 16.05 times its Q3 December 2006 annualized consolidated EPS of Rs 70.80.

State Bank of India (SBI) said it will raise its benchmark prime lending rate by 75 basis points to 12.25% from Tuesday (20 February 2007). This is the second time that SBI, which owns nearly a quarter of banking sector assets in India, has raised its benchmark lending rates in two months. The state-run bank last lifted the rate to 11.5% in late December.

Even after the rise, SBI's prime lending rate is still below some of its private sector competitors. ICICI Bank's benchmark rate for corporate loans is now 14.75%.
As per recent reports, State Bank of India is expected to raise Rs 3074.75 crore through long-term debt in the overseas market by March, to shore up its capital and expand its loan portfolio.

Recently, SBI had raised $ 700 million overseas at a rate 15-25 basis points lower than the pre-budget rates. The bank has raised $ 400 million via hybrid tier I perpetual bonds and $ 300 million through floating rate notes. SBI is also raising Rs 1,000 crore through upper tier II bonds in the domestic market. With the $400 million bond issue and upper tier II bonds, the total amount of capital raised by the bank has touched Rs 10,000 crore in 2006-07.

Earlier this month, the Information and Broadcasting Minister informed that the cabinet had approved the transfer of the Central Bank's stake in State Bank of India. The central bank holds 59.73% in SBI and proposes to transfer it. The transfer will take place by June, and the valuation will be based on market prices.

On 1 February 2007, the State Bank of India had opened its first commercial branch in Bahrain at an initial investment of $3 million. The second phase of the commercial branch services, including the ATM and cheque book facility, would be launched in two months. The on-site ATM will be connected to SBI's other ATMs in the Gulf Co-operation Countries (GCC) as well as about 7,000 ATMs in India.

SBI had started its operations in Bahrain 30 years ago with a representative office, which was upgraded to an offshore banking unit in 1977. The new venture is only the second SBI branch to come up in the Gulf, after Muscat.

SBI reported 4.50% fall in net profit for Q3 December 2006, to Rs 1,065.06 crore (Rs 1,115.19 crore). Total income for the same quarter rose 1.30% to Rs 11546.97 crore (Rs 11398.62 crore).

RIL continues to march north
Reliance Industries gained 0.90% to Rs 1431, amid reports that it is likely to strike a deal soon with US-based Chevron on the D-6 block in the Krishna-Godavari (KG) basin.

Reports add that the officials of both companies, who will probably hold a meeting in the coming weeks, will discuss Chevron’s participation in developing the D-6 block, where Reliance Industries (RIL) is an operator with 90% stake. According to RIL’s partner, Niko Resources, the block has in place reserves of 35.4 trillion cubic feet (TCF).

It is believed that RIL and Chevron will also set up a joint venture (JV) for city gas distribution (CGD) projects. RIL has already sought the government’s approval for taking up CGD projects in Maharashtra, Andhra Pradesh, West Bengal, Tamil Nadu, Gujarat and Karnataka, amongst others.

In 2006, Chevron partnered RIL as co-promoter of Reliance Petroleum (RPL), a start-up, 27-MMTPA export-oriented refinery project at the Jamnagar special economic zone (SEZ). Chevron had bought 5% stake for $300 million, with future rights to purchase additional shares up to 29% in RPL.

Chevron has already signed two memoranda of understanding (MoU) with RIL. The MoUs cover the principles by which RIL and Chevron will seek to optimise refinery crude supply and product marketing, and sets the intent of both companies to pursue other collaboration opportunities in the energy value chain.

The RIL stock also hit an all-time high of Rs 1435.85. As many as 2.65 lakh shares changed hands in the counter on BSE.The counter saw a steady rally in the past few weeks, and was the key driver of the recent market surge. From Rs 1273.30 on 10 January, RIL advanced to Rs 1418.25 by 19 February 2007.

Reliance Industries (RIL) reported 57.6% surge in net profit in the December 2006 quarter to Rs 2799 crore from Rs 1776 crore. The surge in bottom line was much more than market expectations. Net sales for the quarter rose 45.7%, from Rs 18168 crore to Rs 26472 crore.

RIL’s gross refining margin was $11.7 a barrel in the December quarter, much higher than Singapore refining margins. However, the margins of the petrochemicals business declined during the quarter. 'Robust economic growth along with a stable operating environment promises a positive outlook for all our businesses,' the company said in a statement.

During the quarter, RIL doubled the estimated natural gas output from its field in the Krishna-Godavari basin to 80 million cubic metres a day, when it starts production in the second half of the fiscal year to March 2009.

India Infoline prospers
India Infoline surged 2.18% to Rs 371, despite trashing a report about Merrill Lynch looking to up stake in the stock broking firm.The counter clocked a big volume of 1.46 lakh shares on the BSE.

The scrip has been north-bound since as early as mid-June 2006. During the bullish phase, which began in mid-June 2006, the scrip depreciated at only two stages. One in early November - mid-December 2006, and the second time from late January - early-February 2007. The scrip has surged 17.74%, from Rs 308.30 on 1 February 2007 to Rs 363 by 19 February 2007.

At the current market price of Rs 371, India Infoline trades at 29.30 times its Q3 December 2006 annualized EPS of Rs 12.66.

India Infoline declared that the news item ‘Merrill looks to up stake in India Infoline’ was false and misleading. The brokerage firm has clarified that it had not received any such proposal from Merrill Lynch for further acquiring stake in the company, as claimed by the news paper report.

Merrill Lynch currently holds 14.10% stake, while the promoters hold 36% stake in India Infoline.

In January 2007, India Infoline announced its alliance with Bank of Baroda to offer e-broking services to the bank's customers. The alliance is to provide various products and services for wealth management, along with research and analysis services, to the bank's customers.

Named 'Baroda e-trading', the offering includes multiple options to customers for trading in equity shares - online and offline - on BSE and NSE in the cash as well as in the derivatives segment. The tie-up will help India Infoline to reach out to the large customer base of the bank in Gujarat and Maharashtra.

India Infoline posted a net profit growth of 106% to Rs 14.46 crore (Rs 7.02 crore) in Q3 December 2006. Total income during the quarter rose 106.9% to Rs 27.04 crore from Rs 13.07 crore in the year ago quarter.