Announcing the quarterly results on Thursday, RIL managing director Anil Ambani said the momentum is unlikely to be sustained for the remaining period with the recovery already showing signs of weakening. While product prices are likely to soften, crucial input prices like that of crude oil and naphtha are on the rise, he added.

During the first quarter sales have shown a 5 per cent increase at Rs 3,837 crore, while operating profit rose by 12 per cent to Rs 900 crore as net interest costs declined by 60 per cent.

Reliance, during the quarter, has refinanced its domestic debt totalling Rs 2,000 crore through borrowings at lower interest costs. This includes a Rs 1,200 crore securitisation deal for receivables of its Panna-Mukta oil field operations. Reliance would bespending Rs 1,000 crore annually over the next three years on expansion and de-bottlenecking of existing projects, Ambani said. Plans include expanding the polyester capacity to one million tonnes which would also necessitate expansion of the company's PTA capacity, he added. A detailed feasibility study in this regard has been initiated and will take another couple of months. Some of Reliance's plants were set up way back in 1981 and these would have to be upgraded, he said.

Reliance would also consider buy back of shares at an appropriate time depending on the regulatory framework. Ambani added that efforts were on to list the company's shares at the New York Stock Exchange which should be ready within the next six months or a year. Reliance's inter-divisional sales during the quarter amounted to Rs 1,012 crore as compared with Rs 944 crore in the corresponding period last year. The production volume increased 12 per cent to touch 1.90 million tonnes from 1.70 million tonnes, he said, adding thatcommissioning of the Jamnagar complex in Gujarat would push up volume growth in the current fiscal. While production in the polyester business increased 10 per cent to 157,000 tonnes in the first quarter, fibre intermediates volumes rose by 13 per cent.

The polymer business reported a 13 per cent increase to 293,000 tonnes reflecting partly the impact of the recent commissioning of the polypropylene capacity at Jamnagar.

The company had revalued its plant and machinery at Patalganga (Maharashtra) and Naroda (Gujarat) during 1997-98 as a result of which there is an additional charge for depreciation of Rs 96 crore for the quarter ended June 30, 1999. Reliance said an equivalent amount has been drawn from the general reserve which do not impact profit for the quarter. Ambani said the commissioning of the Rs 5,500 crore integrated petrochemicals complex at Jamnagar has already begun.

The company has also reconciled the accounts with US GAAP as well as International Accounting Standards (IAS). Under USGAAP, Reliance's net profit is lower by Rs 91 crore, while that under IAS the difference is Rs 168 crore. Ambani said the difference was primarily on account of the deferred taxation arising out of the surcharge on corporate tax. The company has hedged its entire $1.3 billion of outstanding forex debt, while the total forex debt service outflow during the quarter was $110 million.

INSIGHT
Volume growth boosts profits

In spite of a drop in realisation by 7 per cent, volume growth of 12 per cent saw the company improve its operating margins from 17.8 per cent in the fourth quarter to 19.6 per cent in the first quarter of the current fiscal. Also higher volumes sales from oil and gas business, which are in dollars helped the company achieve better results. With lower capital expenditure requirements for the coming three years and the start of new projects, would raise the return on capital employed, which would have a direct impact on the stock price.

Manish Saxena