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| Reliance to make quarterly tax provisions |
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Reliance Industries Ltd (RIL) is expected to make provisions for taxes every quarter, and not at the end of the year as was being done till now. This crucial change is slated to be for the first quarter of 2001-02, where the RIL net profit is being estimated at around Rs 550 criore.
The net profit for the first quarter is said to be in the range of a figure of about Rs 100 crore as dividend, which has accrued to RIL in the first quarter from Reliance Petroleum Ltd (RPL). RIL will unveil its Q1 results on Tuesday 31/7/2001. According to analysts tracking RIL, the company has been indicating to analysts that it would change the tax provision from annual to quarterly to avoid unduly overburdening the fourth quarter figure every year.
The Q1 net profit figure for 2001-02, when compared with the declared figure of Rs 612 crore for the first quarter of 2000-2001, would, in all probability reflect a fall in net profit in absolute terms, but the company is likely to explain this in the context of some key accounting adjustments which have been undertaken since then. However, with margins under pressure and the import duty for RIL’s chief raw material, naphtha, increased from five to 10 per cent during the first quarter, the bottom line would reflect these aspects and accounting adjustments will also have to be factored in. For instance, the Rs 612-crore figure of last fiscal’s first quarter included a Rs 87 crore component of forex gains on repatriation of offshore balances. This, if taken out, would lead to a figure of Rs 525 crore as actual profit from the business. RIL had at the end of last fiscal, announced a change in the method of calculating depreciation, which resulted in an extra impact of Rs 164 crore for the whole year. This works out to a Rs 41 crore impact per quarter. This new method would henceforth be adopted.
If this is taken into account and the Q1 net figure of the last fiscal is adjusted for this Rs 41 crore, the last fiscal’s Q1 net falls further to Rs 484 crore. Taking into account the last year’s tax component of Rs 134 crore, the per quarter tax then works out to about Rs 34 crore. The last fiscal’s Q1 net, if again adjusted for this tax burden, finally works out to Rs 450 crore. This figure would, analysts say, be the comparable one for RIL for the current fiscal’s Q1 net to be benchmarked against.
Production volumes have grown about 8 per cent, but margins are under pressure. The import duty on naphtha has been increased from five per cent to 10 per cent from April 2, impacting the Q1 figures. The volumes growth may just about balance this out, analysts said, pointing out that after accounting for all these factors, the final net profit figure for the first quarter of the current fiscal is likely to end up in the region of Rs 550 crore. |
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