Markets gave thumbs down to RIL shares on drop in its Gross Refining Margins (GRMs) to $10.1 a barrel, from $10.3 per barrel year-on-year, and decline in gas production from KG-D6 block leading to subdued Q2 performance.
Reliance reported Q2 profits of Rs.5703 crore, up 15.8% from Rs.4923 crore on YoY. The oil refiner’s turnover for the quarter rose 35% to Rs.80790 crore. For the first half of FY2011-11, India’s biggest company by market value recorded a turnover of Rs.164479 crore, logging a 36% growth on year-on-year basis.
More than disappointing RIL Q2 profits, what seem to have pricket markets is below expected performance and negativity surrounding KG basin gas output. Further, CLSA also downgraded RIL’s stock from ‘buy’ to ‘outperform’, cutting its target price marginally on account of disappointing results.
Moreover, RIL is sitting on cash equivalent reserves of $16 billion. Ideally, shareholders would like this cash reserves to be returned to them in form of dividend or plough them back in the business to generate superior returns from the diversified business of the conglomerate.