Mutual funds hike exposure to Reliance Industries

RIL is the second most-held stock after ICICI Bank by all the fund houses together. It figures on the portfolios of more than 300 MF schemes and all the funds together held RIL shares worth about Rs6,800 crore at the end of September

New Delhi: Shares of Mukesh Ambani-led Reliance Industries may have traded weak on the bourses in the recent months, but mutual funds have enhanced their exposure to the stock, attracted by its lower valuation, reports PTI.

More than 200 mutual fund schemes purchased fresh RIL (Reliance Industries) shares, worth an estimated Rs1,500 crore at current value, during the last quarter.

In contrast, about 100 schemes sold RIL shares from their portfolio during the quarter ended 30th September. These shares are worth about Rs350 crore at the current market price.

The MF schemes having purchased fresh RIL shares during the quarter also included those from Anil Ambani-led group’s Reliance MF, the country’s biggest fund house.

Interestingly, the RIL stock fell sharply by about 11% during the July-September 2011 quarter.

In the past one year, RIL stock has dipped by over 20% and hit a 52-week low of Rs713.55 on 26th August 2011 and is currently trading near Rs884 level.

But, RIL figures prominently on the portfolios of various MF schemes, by virtue of being the country’s most valued firm and its high weightage on key market indices including Sensex.

MFs collect money from various investors, including the retail participants, for their different schemes and then invests the same in stocks, bonds and other securities.

One fund house generally runs a number of schemes for different market segments.

RIL is the second most-held stock after ICICI Bank by all the fund houses together. It figures on the portfolios of more than 300 MF schemes and all the funds together held RIL shares worth about Rs6,800 crore at the end of September.

An analysis of quarterly portfolio disclosures of various funds shows that as many as 210 schemes together bought more than 1.7 crore fresh shares of RIL during the last quarter.

On the other hand, about 41 lakh RIL shares were sold by a total of 97 MF schemes during the quarter.

Only two schemes, belonging to Franklin Templeton MF, had no change in their RIL holding during the quarter.

Those having sold RIL shares included only one Reliance MF scheme, while about a dozen schemes of the fund house purchased fresh RIL shares during the quarter.

Besides, the shares were also bought by various schemes of ICICI Pru, UTI, HDFC, Birla Sun Life and Franklin Templeton.

Interestingly, Reliance MF had lowered its exposure to RIL in the last fiscal.

On its part, RIL continued to avoid Reliance MF for its investment needs during the fiscal ended 31 March 2011, even as it parked money in a host of schemes from other funds.

A host of other funds had cut their RIL exposure during the last fiscal and the stock lost its position as the top- held stock for overall mutual fund space to ICICI Bank.

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RIL’s cash pile may soar to Rs1.25 lakh crore by fiscal-end

In an equity research note on RIL, global investment banking major UBS has said that the company’s cash reserves were set for a major boost from the payment of remaining stake-sale proceeds from BP and its strong operational cash flow

New Delhi: Billionaire Mukesh Ambani-led Reliance Industries’ (RIL) cash reserves may rise to $25 billion (about Rs1,25,000 crore) by March 2012, putting the corporate giant in a comfortable position for investments in existing and new businesses, reports PTI.

In an equity research note on RIL, global investment banking major UBS has said that the company’s cash reserves were set for a major boost from the payment of remaining stake-sale proceeds from BP and its strong operational cash flow.

RIL’s cash reserves stood at $14 billion in the second fiscal quarter ended 30 September 2011.

Subsequently, RIL received a balance payment of $3.2 billion in October from BP for a stake sale in energy blocks.

After taking into account the capital expenditure of about $4 billion, RIL’s cash reserves were expected to grow to $18 billion by 31 March 2012, largely due to payments from BP and operational cash flows, UBS said.

Additionally, RIL’s treasury stock worth about $7 billion could further boost its cash reserves to $25 billion by the end of this fiscal, it added.

Addressing the shareholders at the company’s annual general meeting in June this year, chairman Mukesh Ambani had said that RIL would become debt-free on a net cash flow basis in the current fiscal.

RIL had outstanding debt of Rs67,397 crore ($15.1 billion) as of 31 March 2011, as against Rs62,495 crore ($13.9 billion) a year ago.

At the same time, RIL had cash and cash-equivalents of Rs42,393 crore ($9.5 billion) as on 31st March this year, which was nearly double the level seen a year ago.

Since then, its cash level has grown substantially, largely due to the stake-sale proceeds from global giant BP.

RIL completed sale of 30% stake in its 21 oil and gas blocks to BP in August for over $7 billion.

There have been a lot of speculations in the market in recent months about how RIL would utilise its huge cash pile and concerns have been raised in some quarters about the limited clarity on the same.

UBS said that RIL’s net-cash balance was a matter of comfort, ‘contrary to the market’s concern, particularly in the current tight liquidity environment.”

A lack of visibility on RIL’s cash strategy and potential return on investments in non-core businesses like retail, telecom, insurance, hotels, and SEZs has been a dampener on its stock performance and investor sentiment, it said.

However, an efficient use of cash in growing RIL’s core energy assets, new businesses and a potential buy-back of shares would be a positive for the stock, UBS said.

UBS said that any visibility on value creation from its investments and developments like retail turning profitable, a tie-up with a global retailer, the government allowing foreign direct investment in retail, and RIL monetising its SEZ land assets could act as positive catalysts.

UBS said that it believed “some township development in partnership with Infrastructure Leasing & Financial Services is underway” with regard to SEZ land assets.

“Further, we believe efficient cash deployment in future ventures including upstream assets, such as gas blocks, and the LNG chain; new-generation high growth businesses, partnering with technology leaders (such as BP), and a potential buy-back will be positive catalyst,” it said.

UBS also counted inorganic growth of global refining and petrochemical capacity at attractive valuations as potential catalysts, but cautioned that it was unlikely to create significant value as it could make the business more cyclical.

At the same time, the report said that the stock could be affected adversely in the event of any potential regulatory penalties, any severe downcycle for the company’s refining and petrochemicals businesses amidst a global recession.

The risks could also arise from any inefficient use of cash for non-strategic large investments and losses mounting from previous non-core investments, it added.

There have been lots of speculations about RIL’s plans for new segments like broadband and financial services.

For broadband venture, it recently acquired stake in an online education company for an undisclosed amount, while there have been reports about RIL leasing infrastructure from other telecom players.

In financial services space, RIL has formed a joint venture with DE Shaw and has announced buyout of Bharti group’s stake in the latter's insurance ventures with AXA.

RIL’s market value currently stands at about $60 billion (Rs2,90,000 crore). Its revenues were in excess of Rs2,65,000 crore and profits of over Rs20,000 crore in the fiscal 2010-11.

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Value of cheque transactions down 1.4% in September: RBI

Cheque transactions have been on the decline during the past few years with the growth of the electronic transfer medium, according to experts

Mumbai: The total value of transactions carried out using cheques across the country amounted to Rs7.64 lakh crore in September 2011, down by 1.4% over the same month last year, reports PTI.

Banks had cleared cheques worth Rs7.75 lakh crore in September 2010, according to Reserve Bank of India (RBI) data.

The number of cheques cleared by banks in September 2011, however, went up by 2.6% in comparison to the same month last year.

A total of 11.12 crore cheques were cleared by banks during the month under review compared to over 10.84 crore in the corresponding month of 2010.

During the April-September period, the total value of transactions carried out using cheques stood at Rs48.88 lakh crore, as against Rs49.15 lakh crore in the same period a year ago, a marginal dip of 0.1%.

In addition, a total of 66.62 crore cheques were cleared by banks during the first six months of the current fiscal, a decline of almost 3.5% from 68.37 crore in the April-September period a year ago.

In September, the Mumbai region reported the highest number of cheque clearances, as well as the maximum transaction value for any zone.

Banks in the Mumbai region cleared a total of 1.96 crore cheques, with total value of over Rs1.26 lakh crore.

In the Delhi region, banks reported that 1.29 crore cheques with a total value of a little over Rs1.05 lakh crore were cleared in September.

The Chennai region stood third, with banks reporting a total 62.5 lakh cheque clearances worth over Rs44,600 crore.

Cheque transactions have been on the decline during the past few years with the growth of the electronic transfer medium, according to experts.

The value of cheque transactions in the country declined by 2.6% year-on-year to Rs101.33 lakh crore in 2010-11. Delhi and Bangalore were the only major centres to report a rise in the value of clearances last fiscal.

However, the total number of cheques cleared by banks across the country grew marginally by 0.4% in 2010-11.

Over 1.38 lakh crore cheques were cleared by banks across the country last fiscal, as against 1.30 lakh crore in FY2009-10.

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