Mumbai: India’s most valuable company, Reliance Industries Ltd (RIL), is expected to post higher revenue and profit for the quarter ended March, benefiting from improved crude refining margins and gas output from the Krishna-Godavari (KG) basin.

Net profit is likely to increase 31% from a year earlier to Rs5,078.17 crore in the January-March period, according to the average of estimates by seven brokerages polled by Mint.

Revenue is estimated to more than double to Rs59,780 crore.

The Mukesh Ambani-led company, which has interests in sectors as diverse as oil, yarn and organized retail, will announce its earnings on Friday.

The company’s gross refining margin (GRM)—earnings from turning crude into a variety of fuels—in the March quarter is estimated at $8.13 a barrel, sustaining the company’s lead over the Asian benchmark Singapore GRM, which averaged $4.9 (around Rs361) per barrel in the same period.

“Sequential improvement in global GRMs is expected to have an amplified effect on RIL’s GRMs and refining segment profitability..," wrote Rohit Nagraj, an analyst for domestic brokerage Prabhudas Lilladher Pvt. Ltd, in a 6 April research note.

Graphic: Paras Jain / Mint

During the January-March quarter last year, RIL had neither started gas production nor was its 580,000-barrels-a-day Jamnagar refinery fully operational.

In a 31 March note, Macquarie Research’s Jal Irani and Abhishek Agarwal wrote that they anticipate a strong March quarter for RIL “as it benefits from the upswing in GRMs" due to its refining facilities, which have doubled in capacity and improved quality of refining.

The world’s largest refining complex in Jamnagar is capable of refining the lowest grades of crude to produce a high proportion of light and middle distillates such as diesel.

On 13 April, rating agency Standard & Poor’s upgraded its outlook on the company from “negative" to “stable", saying it reflected its “expectation of an improvement in RIL’s financial metrics".

The improvement over the past year is “sustainable", it said.

During Q4 of FY10, crude prices firmed in the range of $71-83 per barrel, after swinging from an all-time high of $147 a barrel in July 2008 to $30 levels by December of the same year.

Still, the company’s shares underperformed the Bombay Stock Exchange’s benchmark Sensex index by 22% in the fiscal ended March—the first dip in five years and the largest this decade.

Eroding refining margins and an ongoing legal tussle with an Anil Dhirubhai Ambani Group-owned company as well as with NTPC Ltd tempered investor sentiment.

Anil Sharma and Ravikumar Adukia, analysts with Nomura Financial Advisory and Securities (India) Pvt. Ltd, said in a 5 April note that the stock slide followed “four straight years of outperformance ranging from 8% to 49% (an average of 26% for the last four years)".

RIL has been engaged in a nearly four-year-old legal fight with Reliance Natural Resources Ltd (RNRL) controlled by Anil Ambani, the estranged younger brother of Mukesh Ambani, over 28 mmcmd of gas that RNRL wants from RIL’s KG D6 block at a price that is 44% lower than a government-set price.

The Supreme Court verdict—one of the key overhangs on the share price last year—on the case is expected soon.

Since the beginning of 2010, the company has seen two of its acquisition bids fail—for Netherlands-based LyondellBasell Industries AF, and debt-strapped Value Creation Inc. of Canada—but finally signed a joint venture in early April with Atlas Energy Inc. for the latter’s shale assets in a deal that will cost $5.2 billion.

Macquarie’s Irani and Agarwal wrote in another 12 April note that the benefits to RIL from the large shale field, especially in a lucrative and nearby market like the US, could be substantial.

“With RIL’s core existing refining business looking up...and incremental volume growth from the KG basin...," they wrote, “we believe that the current transaction is the icing on the cake."