Big Bro RIL's results awaited on Friday--GRM may remain constant

Reliance Industries, India’s largest private green-field refiner will declare its quarterly results on Friday and Dalal Street will be abuzz taking cues from the big bro's results and deciding the path for the stock prices. RIL (Reliance Industries Ltd) known for its ability to build businesses of global scale and execute time critical complex capital intensive projects is expected to post quarterly figures of nearly Rs.7000 crores.

Analysts of several brokerage firms expect the GRM levels to be maintained as previous quarter and see no significant improvement in the same. Gross refining margin indicates the earnings from converting the raw material (crude oil) into finished good (petroleum product: fuel). GRM for Reliance in previous quarter was $11.5 per barrel a 7 year high. The key risks with the stock remains the slowdown in global economy and weaker domestic gas prices which could hamper progress in upstream business. Since RIL has made huge investments in US Shale gas, the weak US natural gas prices will also affect the profitability of the Shale Gas assets.

RIL a complex refiner is expected to benefit from heavier and cheaper crude oil procured from Middle east. RIL is positively leveraged to the depreciating currency and hence a depreciating currency will only help RIL. Largest integrated petrochemical producers globally, RIL, gets 60 percent of its EBIT from refining and 30 percent from petrochemicals.Reliance Retail contributes 2 percent to the EBIT and this can expand as the retail business is expected to post decent growth. Reliance retail, with a presence in 371 cities has more than 3042 stores. Digital sales expected to post good numbers boosting growth for Reliance Retail. Markets will be keenly watching the announcements on Rel Jio and its break even period.

With its 9.1 percent weight in Sensex and 7.5 percent weightage in Nifty RIL results on Friday is an important announcement. RIL has been outperforming the markets and has delivered 17 percent return for 1 year period.