Reliance Industries shares plunge over 3 per cent despite strong Q3 results, here is why

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Updated: January 20, 2016 5:07:49 PM

Reliance Industries shares fall after it on Tuesday reported its highest-ever quarterly net profit of Rs 7,290 crore for the three months ended December on refinery margins spiking to seven-year high.

RIL sharesReliance Industries on Tuesday reported its highest-ever quarterly net profit of Rs 7,290 crore for the three months ended December on refinery margins spiking to seven-year high. (Express photo)

Reliance Industries (RIL) shares plunged as much as 5 per cent intraday on Wednesday despite strong Q3 numbers. The company on Tuesday reported its highest-ever quarterly net profit of Rs 7,290 crore for the three months ended December 2015 on refinery margins spiking to seven-year high.

At 11.02 am, RIL shares were trading 2.45 per cent down at Rs 1,018. The scrip opened at Rs 1,040.50 and had touched a high and low of Rs 1040.50 and Rs 998.60, respectively, in trade so far. Later, the share price of the company closed 3.76 per cent down at Rs 1004.35.

Net profit of Rs 7,290 crore in October-December was 38.7 per cent higher than Rs 5,256 crore in the same period a year ago, the company said in a statement.

Jimeet Modi, chief executive officer, SAMCO Securities, said, “Reliance Industries shares fell in line with overall market selloff in response to weak global clues. The fear of crude capitulation and the resulting sell-off in the equities from Sovereign Wealth funds to balance the shortfall in budget in the oil producing countries is keeping the global markets on the tender hooks. Reliance cannot remain isolated in the midst of turmoil inspite of beating street expectations by a wide margin by posting a rise of 39 per cent in its Q3 PAT number.”

The GRMs in December quarter were at seven-year high and the company’s Jamnagar refineries in Gujarat earn $2.5 per barrel more than Singapore average.

Sales, however, fell 24 per cent to Rs 73,341 crore on benchmark crude oil prices declining 42.7 per cent year-on-year.

Outstanding debt as on 31st December 2015 stood at Rs 178,077 crore ($ 26.9 billion) compared to Rs 160,860 crore as on 31st March 2015.

Post Q3 results, JM Financial revised RIL target price Rs 1,076 from Rs 1,025. The reseach house said, “We maintain ‘Buy’ as we believe that over the next one year most of the capex will come to an end and projects will be completed and start contributing to the revenues. The key risk to our call is lower commodity prices and its potential impact on the margins.”

According to Sharekhan, RIL reported another quarter with a strong margin performance, driven by both refining and petchem segments in a falling input cost environment. The crude oil prices are likely to remain weak given the supply glut (Iran supply to come). Meanwhile with no major refinery coming up, the brokerage house expects high GRM performance to sustain.

Sharekhan retained its ‘Buy’ rating on the stock with an unchanged price target of Rs 1,200.

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