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RIL bogged down
March 10, 2003 16:52 IST
Selling pressure turned the tide on Reliance Industries and it slipped from its day's high of Rs 282.15 in afternoon trades on Monday.
By 12:55 IST, the scrip of Reliance Industries was trading lower by 2.21% to Rs 274.80. The scrip of India's largest private sector corporate entity registered over 900,000 shares on BSE by then. RIL has already lost 9.5% from Rs 303.70 on 24 February 2003.
RIL, like the rest of the market, has been affected by the general negative sentiment seeping into the market as a result of geopolitical tensions . As per market talk, Unit Trust of India was selling quite conspicuously on the counter in morning trades. The market is highly disturbed that UTI may embark on a selling spree over its maturing schemes.
Five schemes of UTI, with a total equity corpus of Rs 680 crore (Rs 6.8 billion), will mature over the next five months. In the near term, UTI is believed to be facing redemption pressure of at least Rs 300 crore (Rs 3 billion), as two schemes - the Monthly Income Plan, which has a total corpus of Rs 788 crore (of which 22% or Rs 173.36 crore is equity holding) and the Master Equity Plan-93, which has a total corpus of Rs 135.56 crore (of which 95.4% or Rs 130 crore is equity holding) - mature on 31 March 2003 and 1 April 2003, respectively.
Besides the overwhelming concerns over war, reports that the Maharashtra government may withdraw concessions on stamp duty for non-delivery trades, which could push up transaction costs by a stiff 500% and a proposal by Sebi to debar FIIs from participating in trading through the participatory note route have further hampered the market. The latter move, has increased anxiety that FII activity itself will decrease.
In contrast to the current trend, RIL opened firm today following reports that Qualcomm, the US-based pioneer of the CDMA technology, has revived its interest in Reliance Infocomm. Qualcomm has shown renewed interest in acquiring stake in Reliance Infocomm from RIL. Qualcomm's interest stems from the fact that Reliance Infocomm uses the CDMA technology for its handsets (in which the US company specialises in) and the growth of the Indian telecom market, especially the wireless-in-local-loop services segment that Reliance Infocomm is part of.
Qualcomm makes money from royalties everytime a chipset is inserted into CDMA phones and other network equipment as well as from license fees when it allows other manufacturers like Samsung and LG to use its patented technology. With most of the developed world coming close to mobile saturation, China and India remain the only markets where demand for CDMA phones will grow sharply this year.
Reliance Industries has projected a target of seven million subscribers in the first year of operations. With Reliance Infocomm providing services based on the CDMA technology, it would be a good bet for Qualcomm to make an investment in Reliance Infocomm. However, as per reports, if at all an investment is made, it will only materialise by September 2003.
On 28 December 2002, RIL launched mobile telephony services nationwide through Reliance Infocomm, the day being the birthday of its founder, the late Dhirubhai Ambani. Reliance Infocomm, an arm of RIL, is expected to roll out basic telephony services in 17 states. It has already laid 40,000 km of optic fibre across the country to cover various facets of telecom services including basic, Internet and long distance telephony. The company is banking on a lower margin-high volume game. RIL has reportedly invested a huge sum in Reliance Infocomm - of over Rs 25,000 crore (Rs 250 billion).
In other developments, last week, there were reports that the Securities Exchange and Board of India had suggested that the debentures issued by RIL in the mid-1990s, subscribed to in a big way by mutual funds behemoth Unit Trust of India, be probed by the Central Bureau of Investigation.
Some analysts say, that, in fact, the probe should not have a major bearing on RIL, unlesss, ofcourse, some major discrepancy becomes evident.
Recently, reports emerged that RIL has found additional gas reserves in the Bay of Bengal. The gas reserves in the newly-discovered block are estimated at nine trillion cubic feet. In October 2002, RIL had indicated gas reserves in the range of 7 trillion cubic feet, or 45 million standard cubic metres per day.
Late October 2002, RIL said that its Krishna-Godavari basin (Andhra Pradesh) gas project will go on stream around mid-2004. The cost of development of the project may total $1.3 billion, it added.
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.
RIL registered impressive results for the third quarter ended 31 December 2002. It posted a 24% rise in net profit to Rs 1,083 crore (Rs 10.83 billion), compared to Rs 873 crore (Rs 8.73 billion) in the corresponding period of the previous year. Total income increased by 7.58% to Rs 11,243 crore (Rs 112.43 billion) from Rs 10,450 crore (Rs 104.5 billion) in DQ 2001. The figures for the corresponding previous period have been restated to include the effect of the amalgamation of Reliance Petroleum with RIL with effect from 1 April 2001.
The promoters hold 43.7% equity stake in RIL, while the public, domestic and foreign institutions hold 15.3%, 13% and 26.4%, respectively.
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