RIL gained in strength today on the announcement of its petrochemicals expansion initiative and recent gas finds.

The scrip of the petrochemicals giant rose from its early low of Rs 321.45 to a 52-week high of Rs 331.40 since trading commenced today. But it did not hold on to that high and was placed at Rs 331.25, above its yesterday's close by 2.13%. Substantial volumes of over 12.5 lakh Reliance Industries (RIL) shares were traded on BSE so far. RIL has now risen 28.4% from Rs 258 on 9 May 2003.

RIL's heavy weightage on the Sensex served to lift the benchmark index as well, to 3,464.05 from an early low of 3,427.36.

FIIs are believed to be behind the strength in Reliance Industries (RIL) . Market buzz has it that the US-based Janus Fund has been active here over the last few sessions.

Many heavyweight stocks are gaining ground due to their attractive valuations. Right now, extraneous and internal factors governing the country like the SARS outbreak in East Asia and the fundamentally strong Indian economy and corporate sector has prompted FIIs to take notice of the country's equities markets. The Indian economy is expected to grow 6% in FY 2003-04.

For RIL in particular, there are rumours that the company may make a placement of equity with an FII at Rs 350 per share, a premium of 5.66% to the current levels.

In any case, RIL has been moving strong since it announced the discovery of gas reserves in the Krishna Godavari basin in October 2002.

The gas project is slated to go on stream around mid-2004. The cost of developing the project is put at $1.3 billion. The gas reserves in the KG block have been estimated at 14.5 trillion cubic feet (tcf).

Meanwhile, at its annual general meeting, on 16 June 2003, Reliance Industries announced that it has found oil in a block off the Yemen coast.

RIL has also said that it has mega expansion plans in all its segments including petrochemicals, oil and gas and refining.

RIL is basically a petrochemicals maker (the largest in the country) and a petroleum refiner (after it merged group company RPL with itself). The company has emerged as one among the largest private sector players in the oil exploration segment as well.

With respect to the refinery business, RIL proposes to set up 1,500 retail outlets at an investment of Rs 3,000 crore in FY 2003-04. Group company Reliance Petroleum (RPL) was merged with RIL effective from 1 April 2001, and following the merger, refining is another major contributor to RIL's revenues after petrochemicals. RIL has also bid for acquiring the 34% government stake in HPCL.

In another area of operations, the company's newly launched telecom service is still in troubled waters following the tariff hiccups with regulatory authorities. But players feel that the tariff problem is closed to being resolved with the authority.

The company's fourth quarter performance was not up to the expected mark. For the fourth quarter ended 31 March 2003, RIL recorded a 32% rise in net profit to Rs 1,101 crore (Rs 835 crore) on a 29% increase in net sales to Rs 13,962 crore (Rs 10,865 crore).

Analysts say, though a first look at the results may prove cheering, the fact that operating margins are down by around 4% to 14.5% is disheartening. In fact, were it not for the change in tax liability -deferred tax write back of Rs 15 crore against a tax liability of Rs 280 crore last year - net profit growth would have been much lower. A noteworthy point is that margins are under pressure at a time when petrochemical product prices are looking up!

For the full year, the company recorded a 27% increase in net profit to Rs 4,104 crore (Rs 3,243 crore) on a 10% rise in net sales to Rs 50,096 crore (Rs 45,404 crore).

The promoters hold 44% equity stake in RIL, while the public, domestic and foreign institutions hold 15%, 13% and 26%, respectively.