Column: Finance


By Jagannadham Thunuguntla

  • The Reliance Industry results for the Q1 FY 13 have been slightly better than the estimates.
  • There is definite positive surprise on the GRM (Gross Refining Margins). The estimated GRM was about US$ 7 per barrel, but the company has posted GRM of US$ 7.6 per barrel. That’s definitely positive during this quarter. Singapore GRMs during the quarter were about US$ 6.6 per barrel. Hence, the Reliance has posted about US$ 1 per barrel premium over Singapore GRMS, which is significant premium. Reliance has got such a healthy premium about 3 quarters back. So, this is a definite improvement from the company point of view.
  • One more interesting aspect of the financials is the “Other Income” segment. The proportion of "Other Income" has reduced to 35% of the overall Profit Before Tax. This is a reduction from the 42% share in the previous quarter. This indicates that the Quality of Profits has increased in case of Reliance from the Operation Profit point of view.
  • The company has aggressively started the buyback with about Rs 2000 Crores of buyback already completed. Further, one can expect that the company will go more aggressively in the coming quarters with buyback. This can reduce the overall cash balance of the company. Hence, one can expect further reduction of share of Other Income in the future quarters as well.
  • To summarize, in this quarter, Reliance has made more money from refining and less money from Money.


  • The year 2012 has already seen call-off of 17 IPOs. The probable amount that these 22 IPOs were planning to raise was to an aggregate of Rs 8,392 Crores.
  • The list of the 22 companies who have called-off their IPOs during 2012 include: Reid & Taylor, Tata Autocomp, Micromax, Embassy Property, Joyalukkas, Lokmat Media, VRL Logistics, Aravali Infrapower, Semantic Space Technologies, etc
  • This is in addition to the call-off of 29 companies during 2011 calendar year. The probable amount that these 29 companies were planning to raise was to an aggregate of Rs 32,400 Crores.
  • So, starting 1st January 2011 till date, about 51 IPOs were called off. The total amount they were expected to raise was about Rs 48,502 Crores.
  • All these 51 companies had valid SEBI approval in hand for their IPOs. Even then, they couldn’t open their IPOs within the validity period of one year from the date of SEBI approval.
  • Besides this, starting 1st January 2011 till date, about 4 IPOs were withdrawn due to poor response after opening the IPOs. This list includes Samvardhana Motherson, Goodwill Hospitals, Plastene, Galaxy Surfacants. The total amount they were expected to raise was about Rs 2,000 Crores.
  • All in all, 55 IPOs didn’t materialized during the period between 1st January 2011 till date. The aggregate that these IPOs expected to raise was about Rs 50,500 Crores.
  • This surely will impact the Indian corporates ability in fund raising to finance their expansion projects resulting in slow down in capacity building and job creation.
  • Further, the government's disinvestment program which was supposed to bring public issues of several blue-chip PSUs couldn’t take off. This can also impact the confidence of the public issue market.
  • The secondary market and global liquidity hold key for the future of IPO market.

—Jagannadham Thunuguntla, Head of Research, SMC Global

July 2012

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