Mumbai: Energy giant Reliance Industries Ltd (RIL) on Monday reported a 3.6% year-on-year increase in consolidated third-quarter net profit, benefiting from higher refining and petrochemical margins.
Consolidated net profit in the three months ended 31 December rose to Rs7,506 crore from Rs7,245 crore a year ago. Consolidated revenue rose 16.2% from a year ago to Rs84,189 crore.
Earnings were boosted by a 12% increase in so-called other income, or income that’s generated from avenues other than its main businesses, to Rs2,736 crore in the December quarter.
“The refining business has delivered eight consecutive quarters of double-digit GRMs (gross refining margins), benefitting from the global demand for transportation fuels and improved product cracks,” said Mukesh Ambani, chairman and managing director.
GRM, or what the company earns from turning every barrel of crude oil into fuel, widened to $10.8 per barrel compared to $10.1 in the September quarter.
Analysts had expected RIL’s GRM to be between $10.5 per barrel and $11.5 per barrel. During the quarter, the benchmark Singapore complex margin increased by $1.5 per barrel sequentially to $6.7 per barrel.
RIL’s revenue from the refining segment was up at 7.5% at Rs61,693 crore.
RIL is the operator of the world’s biggest oil-refinery complex with a refining capacity of 1.24 million barrels of oil per day, located at Jamnagar in Gujarat.
The company’s petrochemicals business sprang a surprise. Analysts had expected the segment to show weaker numbers on the back of falling margins and demonetization.
Segment revenue in the petrochemicals business grew 17.8% to Rs22,584 crore. Earnings before interest and tax (Ebit) grew faster at 25.5%. As a result, the petrochemical margin was a better-than-expected 14.4%, up 80 basis points from a year ago. One basis point is one hundredth of a percentage point.
“Demonetization has had no impact from our overall earnings point of view. Overall impact from demonetization has been positive for core retail business,” said V.Srikanth, joint CFO of Reliance Industries.
The stand-alone oil and gas segment saw revenue decline 8.4% to Rs1,215 crore. This decline was led by lower production in domestic blocks.
RIL’s KG-D6 basin produced 0.26 million barrels of crude oil in the second quarter, down 28% from the year earlier. Natural gas production too declined 29% year-on-year to 24.4 billion cubic feet.
Srikanth said the company was close to its peak debt at Rs1.18 trillion. In the previous quarter, the company said it will spend an additional Rs1 trillion on Reliance Jio Infocomm Ltd by 2020, taking its total investment in the venture to Rs2.5 trillion.
Reliance Jio had managed to enrol 72 million subscribers as of 31 December 2016. According to the management, it is adding an average 600,000 subscribers per day. Reliance Jio is now planning to raise Rs30,000 crore from a rights offer and will use the proceeds to enhance its network capacity.
“While the petrochemicals business has done well because of stable margins and higher volumes, the future driver will be the telecom venture,” said Dhaval Joshi, an analyst at Mumbai-based Emkay Global Financial Services Ltd, told Bloomberg. “The stock’s big movement hereon depends on how quickly telecom operations turn around.”
The organised retail business saw revenue grow by 7.5% to Rs8,688 crore.
Ahead of the earnings announcement, RIL shares closed at Rs1,077, down 1.21% on the BSE, while the benchmark Sensex was up 0.18% to 27,288.17 points.
Bloomberg contributed to the story