I have invested some good amount in Reliance Petroleum (RPL) at the average price of Rs.66+. And I expect to grow my investment as any other reliance scrips, particularly Reliance Industries (RIL). I have invested little sum in other Reliance companies, like Reliance Communication and Reliance Energy. I am waiting for Reliance Industry to come down little before I invest something in it.
Now with RPL, the actual business will not start before 2008-09, however the company has hinted that may be the production will start bit earlier,, about six months earlier than the declared date. So, its first profit and EPS (if any) will be seen in somewhere 2010.
However, looking the tax and other benefits on account of operating from SEZ, RPL will be having upper hand over the most refineries. Its profit margin will be nearly double than other in the sector. I do not know much about its business preposition.
Shareholding pattern is mammoth in every sense RPL has issued 450,00,00,000 (450 crore, 4500 millions) equity shares. Out which 75 % stake is held by RIL as promoter/parent company at the face value of Rs. 10-00. 5% of stake is sold to Chaveron for USD 300 millions at about Rs.60-00 per share with agreement of additional purchase of 24% of shares, from the stake of RIL.
About 8.8 % shares are held by institutional investors like banks,MF, FII, Insurance co. etc. Rest of 11.11 % are held with non-institutional and private investors , and out of these 11.11 %, 3.95 are with body corporates, and therefore only 6.41 % are with individuals who have less than 10,000- shares. Nearly 90% are locked-in shares. Therefore looking to little percentage , though the number of share will be somewhat 28 crores, in the trading market make the scrip attractive.
I am not share market analyst, but looking to the facts at the present Rs.66-00 is good investment in long term of 3-5 years. I have been investing in RPL from the price of Rs. 60-00, and I am averaging the price at every opportunity. However, the production is not starting at least for 2 years, but still price of the scrip is slowly rising, probably by the investors purchasing and holding the shares and causing scarcity in the market.
What I expect is to double my investment , and I believe it will happen as soon the production is started. I expect the price at Rs. 120-140 in year 2008-2009, average Rs. 3-00 increase every month during next 2 years.
Further , even when the target price is achieved , still I may not consider to sell my holding. I believe when RPL starts making profit, and mostly from the firs year, it will declare generous dividend. Suppose, RPL declares 50% dividend, Rs.5-00 per share, still I am getting 11 % on my actual investment, additional to the price appreciation. By the dividends from RPL , RIL will be having tax free income in billions. (side note : therefore, some people prefer to buy RIL instead of RPL, because of 75% stake of RIL and as soon RPL is appreciated, RIL will be benefited). Further I expect some right issues (not much of bonus) in early years to increase capital for expansions by the company. However I am not sure about this investment plan, but I feel it will happen more likely that or better.
Few of my friends apprehend that RPL may be again merged with RIL as it happened previously in 2002. I have no firm idea about the business tactics. But RPL is based in SEZ having all the benefits, therefore, as per my knowledge it is not permissible to merge SEZ unit with ordinary unit, otherwise all benefits are removed.
Note of caution : I am not expert on shares etc., all information,data are available in public and views are strictly mine’s. And I do not encourage to buy , in case if you want to you are requested to consult professional share broker. I am not liable for any losses, if any.
I welcome any suggestions and advise from the better equipped and better informed persons. And even you have some doubt or query, let me know it will be helpful to discuss over it.
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