Why stocks of reliance are declining ?
Here are 5 reasons why the stock may come under further selling pressure:
1) Gross refining margins have hit the lowest level since December 2009, according to a report by Bank of America Merrill Lynch. GRM is the difference between total value of petroleum products and price of crude. Higher the GRMs, higher the profit yields.
2) In the four quarters to date, RIL’s GRM has slipped below the Singapore GRM and is down on a year-on-year basis. The Singapore crude is considered a benchmark for complex refineries. Theoretical GRM in Q4 FY12 stood at $5.2-6.5 per barrel against $9.2 per barrel in the fourth quarter of FY11 .RIL’s GRM is now at a discount to Singapore GRM of US$7.8 per barrel.
3) Impact on PAT: Reliance Industries’ fourth quarter PAT is seen at Rs 3,690-4,260 Crore (at current Q4 theoretical GRMs), which is 21-31% lower on a basis, because of declining GRMs.
4) Impact on earnings per share: The investment bank expects 11-21% downside to RIL’s FY13 EPS if GRM stays at 4QTD level.
5) Impact on FY 13 earnings: A one dollar fall in gross refining margins (GRM), will impact profit after tax (PAT) by Rs 1,800 crore, Sonam Udasi, Head-Research at IDBI Capital told NDTV Profit. GRMs have started moving lower dramatically over the last 1-1.5 months and more than Q4, we are worried about FY13, he added.