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Our Bureau

Mumbai, Oct. 17 It was a bloodbath in the securities market on Friday, and one that did not spare the country’s largest private sector company, whose scrip plummeted to new lows.

The share price of Reliance Industries Ltd fell by 6.58 per cent and closed at Rs 1,305.25, a new 52-week low.

Reliance Industries Ltd has a weightage of 13.51 per cent in the Sensex and a market cap of Rs 1.89 lakh crore, both of which are highest in the Sensex.

The share price has fallen by more than 30 per cent over the past month, while the benchmark Sensex has fallen by around 25 per cent during the same period.

Stocks such as Reliance, which have higher exposure to FIIs, continue to be battered during the past few months, said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Market Services.

According to analysts, a slowdown in the global economy and resultant fall in demand for crude products is going to impact the company.

The declining product demand and increasing refining capacities globally are going to put the refining margins under pressure, said Mr Deepak Pareek, Analyst, Angel broking Ltd.

Softening of refining margins would affect the core business of the company, said analysts.

About 60 to 65 per cent of RIL’s revenues comes from the refining business, said Mr Pareek.

With crude prices substantially high a few months ago, it was expected that the revenues of the refining business of RIL would be high too, said an analyst. But with crude falling to levels of $70 a barrel, the profit margins and turnover at RIL are going to be affected for the coming quarters, he said.

Reliance Industries’ net profit for the first quarter had gone up 13 per cent on higher revenues and strong margins from refining, its largest business.

According to analysts, the results had been better-than-expected, considering the adverse conditions in the quarter, but the company had not reported such a low bottom line growth for several quarters.

The company’s gross refining margin for the quarter ending on June 30, 2008, was $15.7 a barrel, up from $15.4 a year ago.

A research report from Angel indicates that RIL’s gross refining margins were in line for the quarter ending June 30 but its petrochemical margins were under pressure.

Not only has there been value erosion in the share price of the company, but even the growth for the coming quarters might be muted, said Mr Vishwas Agarwal, an independent analyst.

More Stories on : Stocks | Stock Markets | Reliance Industries Ltd

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