Reliance Industries Q1 net jumps 13%

The flagship company belonging to Mukesh Ambani has reported a net profit of Rs 4,110 crore or earnings per share of Rs 28.3 for the three months ended June 2008, as against Rs 3,630 crore or EPS of Rs 25 in the year ago period. Revenue in the first quarter of fiscal 2009 increased by 38% to touch Rs 41,805 crore as against Rs 29,721 crore in April- June 2007.

Nearly 95% of the increase in turnover was due to increase in prices and only 5% were because of volume increase, said a press release from the company.

According to analysts, RIL has recorded gross refining margin (GRM), the difference between the total value of petroleum products produced by the refinery less the price of input, of $15.7 per barrel against $9.6 per barrel, the benchmark Singapore gross refining margin, in the first quarter ended June 2008.

The refinery margins of Reliance Industries, which traditionally had the industry's highest, were below the state-owned Chennai Petroleuem Corporation Ltd's (CPCL) refinery margins of US$15.89 in the first quarter of fiscal 2009, as per information provided in the Bombay Stock Exchange (BSE).

Refinery business account for nearly two-third of the company business. The margins, which were $15.4 a year earlier, are boosted by the refinery's ability to process cheaper, high-sulphur crude oil. Refining and margin account for 66 per cent of RIL's business.

"RIL's margins are below the street's expectations. The refinery margins are under pressure as crude oil prices continue to remain high. Coupled with reduced demand for oil products in the overseas markets the margins have been put under pressure and this pressure will continue as long as oil prices remain high," said Vinay Nair, research analyst at Khandwala Securities who maintains a "buy" on the RIL stock.

RIL shares went up 1.81 per cent at Rs 2306.55 on the BSE today. However, the results were announced after the markets closed.

Commenting on the results, Reliance Industries chairman Mukesh Ambani said, "We are confident that the new growth drivers Oil and Gas, Organized retailing and Agro-Retail will take Reliance to a higher growth trajectory in the medium term."

The company' retail operation, Reliance Retail Ltd has so far opened 735 stores in 70 cities, with over 3.5 million sq ft of floor space. But, revenue from this company was not disclosed.

With production from the Krishna- Godavari basin expected to start in the current fiscal, Nair expects growth to be driven by sale of gas, adding, "That is where the real money will come from,".

The company also announced that it has made two gas discoveries- block KG in VD3 and KG-D6 block.

"Petrochemical margins at around 10 per cent have been high despite higher feedstock prices and almost stagnant end product prices. This is a reason why their net profit rose," Nair added.