>RELIANCE INDUSTRIES LIMITED: Comparison of RIL’s 3QFY12 results with 2QFY12 and 3QFY11 results

Financial highlights
■ EBITDA and net income. RIL’s 3QFY12 EBITDA declined 26% qoq and 23.7% yoy to `72.9 bn led by (1) lower refining margins, (2) lower production from KG D-6 block and (3) weaker performance of the chemical segment. 3QFY12 net income declined 22.1% qoq and 13.6% yoy to `44.4 bn.


■ Other income. Other income increased 55.8% qoq to `17.2 bn reflecting higher cash balance in 3QFY12. RIL had cash and cash equivalents of `754 bn at end- December 2011 versus `615 bn at end-September 2011.


■ Interest expense. 3QFY12 interest expense increased to `6.9 bn compared to `6.6 bn in 2QFY12; gross interest expense including interest capitalized of `1.1 bn was `8.1 bn. RIL’s implied interest rate was 4.3% in 9MFY12 and 4.3% in FY2011.




■ DD&A charges. 3QFY12 DD&A declined 13.4% qoq and 23.5% yoy to `25.7 bn reflecting (1) the first full-quarter impact on depreciation from reduction in gross block by the amount received from BP and (2) lower depletion due to lower production from KG D-6 block. RIL has not provided breakdown of depreciation and depletion separately.


■ Taxation. RIL’s 3QFY12 effective tax rate was 22.6% compared to 22.1% in 2QFY12 and 19.5% in 3QFY11. We note that RIL continues to provide for tax at the MAT rate of 20% for gas produced from its KG D-6 block.


■ Net debt. RIL’s end-3QFY12 net debt stood at –`0.4 bn against `99 bn at end- 2QFY12 reflecting `72 bn of gross cash flow generation (net profit + DDA + deferred taxation) and receipt of `147 bn of cash received from BP in October 2011. Net capex (adjusted for foreign currency gains or losses on foreign currency loans) was `58 bn in the quarter. We note that net capex includes (1) actual cash capex (not disclosed for 3QFY12) and (2) increase in gross block due to capitalization of increase in foreign currency loans due to depreciation in the value of the Indian Rupee against the US Dollar. The company has disclosed cash capex of `48.4 bn for 9MFY12, significantly lower than reported net capex of `124.6 bn. However, we would note that the net debt figure would capture the movement in foreign currency loans also due to movement in currencies of foreign currency loans relative to the reporting currency. Exhibit 3 gives details of movement in net debt over the past few quarters and years.


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