Kotak sec's Excerpts from the Research Report on RIL's Valuation,
As discussed in our September 28, 2010 report tilted Treasured shares, the accounts of Reliance Industrial Investments and Holdings Ltd (RIIHL) do not reflect the accounts of the Petroleum Trust. However, the accounts have been prepared as per Indian Accounting Standards. We note that the carrying cost of the investments in RIIHL’s accounts shown under “Interest in a Beneficiary Trust” is unchanged at `16.6 bn between FY2009 and FY2010 (see Exhibit 1). This would suggest that the funds from the sale of shares (`93 bn gross and `86 bn net) should be on the books of Petroleum Trust in the form of cash, investments or advances
Our SOTP-based fair valuation for RIL stock is `1,015 based on FY2012E estimates. We model a recovery in chemical and refining margins in FY2012E and believe our assumptions are somewhat optimistic (for example, we model FY2012E refining margin at US$9.5/bbl against 1QFY11’s US$7.3bbl). Also, we see downside risks to earnings from taxation-related issues.
