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`Other income' shores up RIL bottomline

Raghuvir Srinivasan

BL Research Bureau

THE 13.81 per cent growth in the bottomline of Reliance Industries in the first quarter of fiscal 2001-02 has to be seen in the context of two main factors. First, the generous help from `other income' which was higher by 63 per cent or Rs 49 crore compa red to the same period last year. And second, the 13.76 per cent drop in interest charge to Rs 257 crore, courtesy the repayment/pre-payment of long term-debt and substitution of high cost borrowings with lower-cost ones.

But for these two factors, not necessarily generic to the business of producing petrochemicals, the bottomline may have been flat.

It is evident that Reliance had to endure a tough time at the market place. It has done well in pushing sales volume by six per cent which translated into a four per cent growth in turnover. But a drop in major petrochemical prices in the last quarter sh aved off two percentage points from the volume growth.

A comparison of the sustainable earnings (excluding other income) of this quarter with the last shows a growth of just 5.59 per cent at the post-tax level.

If one eliminates the Rs 49-crore rise in ``other income'' in this quarter compared to the last, the growth in the net earnings drops further to 4.78 per cent. Of course, the company has maintained its operating margins at around 18.40 per cent, the same as the previous period.

It appears that the superior financial management skills of Reliance came to its aid in reducing interest costs. It was this that ultimately helped the company manage a good growth in the bottomline even in these troubled times for the petrochemicals ind ustry.