Results Update - 31/01/2008 - Part 2

IOC Q3 net up 17% to Rs 2,091cr

Indian Oil Corporation today announced a 16.70% rise in net profit at Rs 2,090.69 crore for the quarter ended December 31, 2007 when compared with Rs 1,791.37 crore in Q3FY07.

According to a release issued to the Bombay Stock Exchange, total income increased to Rs 65,404.84 crore for the quarter ended December 31, 2007 from Rs 56,438.16 crore for the quarter ended December 31, 2006.

Unitech Q3 net up 39% at Rs 526cr

Real estate firm Unitech today reported a 39% increase in consolidated net profit at Rs 525.78 crore for the third quarter ended December 31, 2007 when compared with Rs 377.84 crore in Q3FY07.

Total income of the group during the quarter under review was Rs 1,165.11 crore, up 19% from the corresponding period last fiscal, the company said in a release today.

ACC FY07 net up 15% at Rs 1,427cr

ACC today announced a 15.14% increase in net profit at Rs 1,427.34 crore for the year ended December 31, 2007 when compared with Rs 1,239.60 crore for the year ended December 31, 2006.

According to a release issued to the BSE, total income increased to Rs 7,189.43 crore in FY07 from Rs 5,984.56 crore in FY06.

The company, on a standalone basis, reported a net profit of Rs 1,438.59 crore in FY07 as against Rs 1,231.84 crore in FY06. Total income increased to Rs 7,135.97 crore from Rs 5,945.13 crore in FY06.

The board today approved a final dividend of Rs 10 per share for FY07.

Along with the interim dividend of Rs 10 per share paid earlier, the total dividend for FY07 is Rs 20, the release added.

Uttam Galva Steels Q3 net up 29%

Uttam Galva Steels has recorded a net profit of Rs 29.15 crore in the quarter ended December 31, 2007, an increase of 29% over the same period last year.

Net sales for the quarter touched Rs 582.69 crore, up 12%.

For the nine months (April-December 2007), net profit stood at Rs 93.39 crore, up 14%.

Ankit Miglani, director (commercial), Uttam Galva Steels, said focus on value-addition combined with operational efficiencies contributed to a healthy bottomline.

“With the completion of our expansion plans in their final stages, we will be better equipped not only to fulfill diverse customer needs in the domestic market but also further consolidate our presence in the global markets in the quarters ahead,” he said.

The company has crossed exports of two million tonne of value added steel. In the last one year, Uttam Galva has increased its exposure to the export markets from 120-135 countries. The company has entered into an agreement with Ispat Industries to buy five lakh tonne of hot rolled (HR) coils per annum making it the sole domestic supplier of HR coils to Uttam.

IOC raises prices of branded fuel

Customers of branded fuel – XtraPremium petrol and XtraMile diesel – from the Indian Oil Corporation Ltd (IOC) stable will now have to pay slightly more. With effect from midnight of January 3, IOC has raised the prices of its premium quality petrol by 20 paise per litre and diesel by 10 paise, which are at a minimum level.

This in effect would mean the branded petrol in Delhi will now cost Rs 1.70 more than the normal petrol (Rs 43.52 per litre) and premium quality diesel would be dearer by 50 paise from the normal (Rs 30.48 per litre).

“This price revision is at the minimum level. However, depending upon market conditions there is scope for revision in prices both upward and downward,” sources said. Public sector oil marketing companies have the freedom to revise prices of premium auto fuel brands without Government permission. However, despite this hike, the prices still remain lower than the rates at which private sector players Reliance Industries Ltd and Essar sell there products.

“Besides, these prices are lower than the desired increase in the retail selling prices due to soaring crude prices,” sources said.

RIL sells petrol at about Rs 50 per litre and diesel is about Rs 38 a litre in Uttar Pradesh, while Essar sells at a rate which is about Rs 4 to Rs 5 per litre higher than State-owned companies. RIL had increased the retail selling price of petrol and diesel by Rs 2.50 per litre effective January 1. Both Essar and RIL only sell premium fuel.

Speaking to Business Line a senior IOC official said, the sale of branded fuels has changed with dynamics of the market changing. “People are now willing to pay higher price for quality products. With the launch of new generation cars and the changing scene in auto sector in India large number of customers are demanding branded fuel. Trend shows 25-30 per cent customers shifting to branded fuel from normal fuel,” he said.

For non-branded category, the Government is still controlling the prices. However, with the crude prices flirting with $100 a barrel mark, the Government is under pressure to consider a price revision to partially offset the revenue losses suffered by the oil companies.

The Indian crude basket on Thursday was at $94.62 a barrel, the highest till date. The oil marketing companies – Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation – are together losing around Rs 220 crore per day on sale of petroleum products at subsidised rates.

IOC to venture alone for small onland blocks in seventh round

Indian Oil Corporation Ltd is gearing up to venture out alone in the domestic oil and gas exploration & production (E&P) activities. The company plans to aggressively bid as an operator for the new category of acreages — small blocks — put on offer under the seventh New Exploration Licensing Policy (NELP) round.

However, for the deepwater blocks offered in the latest licensing round, the company will scout for a foreign partner.

Mr B.M. Bansal, Director-Planning and Business Development, said: “The small blocks give IOC an opportunity to participate on our own as an operator. Till now IOC has not been able to acquire assets as an operator due to the technical criterion prescribed.”

Special dispensation

In NELP VII, the Government has introduced a new type of onland blocks called Type-S, covering small areas up to 200 km. For these blocks, the Government has provided special dispensation in the form of waiver of technical capability criteria.

Under NELP VII, 57 oil and gas blocks, comprising 19 deepwater blocks, nine shallow water blocks, and 29 onland blocks have been put on offer. Of the 29 onland blocks, the Type-S category has nine blocks, mainly in Cambay Basin.

“Participation in this category will give us the desired experience of an operator. However, for deepwater exploration, we will have to rope in a partner with technical expertise,” he said.

Most of the 19 deepwater blocks offered under NELP-VII are in less explored basins. Therefore, it would require operators having experience in deepwater activities.
Upstream portfolio

At home, IOC currently has 12 oil and gas assets. IOC and its consortium partners have been awarded two exploration blocks in Mumbai offshore in Round-VI of bidding under NELP. With this, IOC has an upstream portfolio consisting of participatory interest in eight blocks under NELP and two blocks under coal-bed methane, in addition to two farm-in blocks in northeast India. The company has seven blocks overseas.

Short Term Tips - Buy Indian Oil Corp (IOC)

Buy Indian Oil Corp at CMP of Rs. 503/-

Target of 540/-
Stoploss at Rs. 490/-

Duration - 30 days

The stock is currently trading above it's all short term and Long term EMA. The stock is currently exhibiting a strong bullish pattern.

Reliance Petroleum Limited (RPL) - A Speculators Den

Recently I came across an article published in "Hindu Business Line" dated Nov 1st' 2007 with title "Reliance Petro beats M-Cap of all refiners put together" (www.thehindubusinessline.com/ 2007/11/01/ stories/2007110152540100.htm). The article actually surprised me and prompted me to look at the reasons for Investors (rather Speculators) giving such huge valuation to an company which is about to be operational in mid of 2008.

Eventually, I was not able to figure out the reason, for a stock which can be currently either Operated by the promoter itself or driven high by a broker under the influence of the promoter. I really don't have anything against the promoters, infact I respect their business model to a great extent and really value what reliance has added in fueling the Indian Economy.

The company has been given a valuation almost around 2.5 times (at the time of writing this article) to that of India's largest refinery Indian Oil Corporation (IOC). Is this Justified?. Let me further compare both IOC and RPL fundamentally and see if such huge valuation of RPL is justified

1) RPL is going to be operational with 29 million metric tonne per anum (MMTPA) during mid of 2008 as compared to IOC's existing refining capacity along with it's group companies of 60.2 MMTPA (47.35 MMTPA on a standalone basis).

2) IOC as a company is involved in manufacturing of well established Oil products like Lubricants, LPG, Industrial Fuels etc as compared to none of RPL to date.

3) RPL's earning visibility is a black box until operational as against IOC's sales turnover of US $5.1 billion.

Who's Buying RPL?

Based, on the latest shareholding pattern of Sept' 07 the mutual fund's were net sellers on RPL (Compared to Jun'07). Their holding decreased to 28.1 million shares from 44.4 million shares.

FII's pared exposure to RPL shares. Their holding was reduced from 137 million shares to 102 million shares.

Similar is the case with Financial Institution, which currently holds around 132 million shares as compared to 162 million previous quarter.

Insurance companies shed around 8 million shares from it's portfolio.

Having all Institutions being net sellers, I examined the details further on who actually is making RPL stock to touch higher levels every alternate day..

There were 400 shareholders added to those holding greater than one lakh in share capital. Their holding increased from 32.3 million shares to 49.4 million shares. Now surely this additional 400 investors are either brokers or HNI's manipulating the prices of RPL. Say at a average price of Rs. 150/- per stock the Investor has to invest atleast 1.5 million rupees to buy excess of one lakh in share capital which surely cannot be a retail investor.

What's in it for reliance?

This is purely my imaginary guess that the company may be planing to sell some shares to Institutions and want better valuation to pocket.. Or maybe brokers want to make huge profit. who knows?. Indian markets in many cases have been a black box and it is the insider's who gets benefited from these stocks. It is very late before the news reaches the retail investor.

Maybe the stock may hit new highs in the days to come and can even be another Unitech or Jai Corp in place, but my advise to retail investors is to invest with caution. Invest only if you are an Investor with high risk profile.

To finish, RPL's current valuation is almost 4 times it's total project cost without even a single penny generated. Who will get such a high valuation?