Volumes Growth Key To Ril Figures

Net profit touched Rs 651 crore against Rs 633 crore last year, while sales crossed the Rs 4,000-crore mark to touch Rs 4,041 crore. Last year's figure was Rs 3,966 crore.

Reliance's explanation is that their volumes have risen. "Everyone was focusing on price fall, they forgot our volumes are going up offsetting the decline in prices," explained a company spokesman.

This is true, but only partially. In the first half, Reliance commissioned new capacities in polyester yarn (60,000 tonnes), staple fibre (80,000 tonnes) and polypropylene (3.5 lakh tonnes).

Of this, polyester yarn was commissioned around the middle of the first half.

 

The other two plants were commissioned only in September, just 30 days before the end of first half.

Reliance sources say all three plants are working to full capacity and have stabilised remarkably well.

This may be true. But the real question is whether this volume growth made up for price losses.

Against first half of 1995-96, volumes in polyester yarn grew from 1.10 lakh tonnes to 2.30 lakh tonnes.

The prices, dropped from an average of Rs 103 per kg for 1995-96 to Rs 81 per kg (net of excise) in first quarter of 1996-97. They have since declined to Rs 72 per kg.

Similarly in staple fibre, volumes have expanded by 80,000 tonnes.

At the same time, average price in first quarter of this year is Rs 57.6. It has now declined to Rs 54-55 per kg, not including various cash discounts.

"The explanation of higher volumes does not wash. In yarn, they are not large enough, while in staple fibre, the volume increase came too late to matter," says an analyst at a domestic broking house.

Reliance claims that the plants stabilised fast, but analysts say they would still need at least 10-15 days after first day of production to reach full capacity.

This is especially true of petrochemical plants like polypropylene (PP).

The staple fibre and PP plants were commissioned around early September.

If they stabilised fast, it means they were working to full capacity before the first 15 days, which by industry standards is quite a feat. This gives Reliance only 15 days of sales.

Back of the envelope calculations show, this works out to sales of around 3,300 tonnes for PSF and 15,000 tonnes of PP, assuming the plants work at 100 per cent capacity.

Analysts point out these figures are too tiny to effect big increase in profits or gross sales.

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