Good News for Reliance: Bad News for Analysts

Reliance is the largest private company in

India

. Energy business is the major business of the company. In refines crude oil and produce various petrochemical products. In the third quarter Reliance had crossed their estimated profit margin. The surprising news is that analysts made huge mistakes in reflecting the actual profit margin. I am quoting from the news published in The Times of India:

On Thursday evening, over 40 equity analysts sat unusually quiet at a meeting called by Reliance officials at the President Hotel to explain the company's third quarter results.

The analysts simply couldn't believe they could all go so terribly wrong in predicting the company's quarterly results.

The analysts had estimated the quarter's net profit at Rs 2,200 crore, but they missed the actual figure by a wide margin.

Reliance's Rs 2,800 crore profit was Rs 750 crore higher than the DSP Merrill Lynch estimate and Rs 650 crore more than what HSBC prediction.

Equity analysts are very highly paid for their jobs. Based on their advice big companies invest in various businesses. Such a mistake from them is very shameful. A third of Reliance’s profit comes from refining. As the popular refining margins around the world were going down analysts did not expect that Reliance’s refinery would shot upwards. Reliance’s refining margins went up to $11.7 from $9.1 in this quarter. Reliance officials contributed this success to their Jamnagar Refining Complex. It is designed to process all kinds of crude oil.

There is a famous saying “To err is human.” The HSBC and Merill Lynch Analysts may be very highly qualified but they are human as well. Moreover, the way I see it Reliance has made an unexpected profit. Expected and unexpected, profit is the main goal of all business. Hence, Reliance should be happy. What do you think?

The Times of India

Good News for Reliance is also bad news not only for the analysts, but also for the consumers. Of course, here I am refering to Reliance Infocomm and not Reliance Industries. Visit the link below for the full story.
http://reliancemobilevictimsblog.blogspot.com/

Posted by: Ganpat | February 11, 2007 4:30 AM | Permalink to Comment

The ascendency of India as an economic world power

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