Mumbai: Energy giant Reliance Industries Ltd (RIL) reported a 12.3% increase in its consolidated March quarter profit, boosted by higher refining margins and better earnings from its petrochemical unit.

The cash generated by these businesses enabled the firm to invest aggressively in its telecom venture; yet, by the end of March, the firm reported a decline in cash balances and an increase in debt.

RIL’s March quarter profit of Rs8,046 crore was in line with analyst estimates. Consolidated gross revenue rose 45.2% from a year ago to Rs92,889 crore, mainly because of increased oil and petrochemical prices. During the March quarter, Brent crude prices averaged $54 per barrel compared with $48.2 a year ago.

RIL reported a higher-than-expected gross refining margin (GRM) of $11.5 per barrel. GRM refers to a company’s earnings from turning every barrel of crude oil into fuel.

“Refining is in a good spot. This is a ninth consecutive quarter of double-digit refining margins for us. Double-digit margins are here to stay. Within this year itself, we have both our gasifiers coming in and this will add to our gross refining margins as well as our earnings," said V. Srikanth, joint chief financial officer of RIL.

Analysts had projected GRMs in the range of $10.5-11 per barrel. In the year-ago quarter, RIL reported GRMs of $10.8 a barrel. RIL’s strong GRM performance also came at a time when Singapore’s benchmark GRM was slightly down on a quarterly basis at $6.5 per barrel.

There was a “strong beat in GRM at $11.5 per barrel", said Abhijeet Bora, who tracks oil and gas for brokerage firm Sharekhan by BNP Paribas.

For the fiscal year ended 31 March, net profit rose 0.5% to Rs29,901 crore while gross revenue increased 12.6% to Rs3.3 trillion.

Ahead of the earnings, RIL shares closed at 1,416.40, an increase of 1.19% on the BSE, while the benchmark Sensex gained 0.99% to 29,655.84 points.

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, at Jamnagar in Gujarat. RIL reported a 6.4% increase in its March quarter Ebitda (earnings before interest, taxes, depreciation and amortization) to Rs14,164 crore.

The petrochemicals segment reported a 25.8% year-on-year increase in profit before interest and tax. This was on the back of a 26.4% increase in revenue because of higher product prices.

Still, the continued investment in Jio—where RIL has invested Rs1.79 trillion so far and is guided to tamp up to Rs2.5 trillion by fiscal 2020—has meant a depletion in cash balances and increase in debt.

The business would be critical to RIL’s performance in the future, Bora of Sharekhan by BNP Paribas added.

“Financial performance of telecom venture remains important for consolidated earnings outlook in the near to medium term."

The firm’s consolidated debt at the end of March was Rs1.96 trillion compared with Rs1.8 trillion a year ago. Cash and cash equivalents were at Rs77,226 crore, down from Rs89,969 crore in the year-ago period. For the just-ended fiscal year, RIL’s capital expenditure was Rs1.15 trillion, said RIL’s Srikanth.

“Debt (is) higher on account of investments in Jio and refining," said Srikanth. “The good news is our capex cycle from hydrocarbon point of view and every other aspect is over and I don’t expect anything meaningful in 2017-18. It is more the time for the cash flows to start for us."

He said that for some two-third of the investments, the full benefits will start kicking in from the current fiscal.

Apart from refining and petrochemicals, the company’s retail business reported a 83% growth in revenue and 65.6% growth in earnings before interest and taxes. It said it would spend Rs2,500 crore this year to expand to over 500 retail outlets. The oil and gas business continued to drag down profits with a Rs486 crore loss.

RIL does not see major capex for its Shale gas business in the US, Srikanth said. “Though shale gas prices have improved, we want prices to improve a bit more and become more stable."

Reliance Gas Pipelines Ltd (RGPL), a wholly owned subsidiary of RIL, has laid a 302km Shahdol-Phulpur Gas Pipeline that connects Sohagpur CBM fields from Shahdol to Hazira-Vijaipur-Jagdishpur pipeline network of GAIL at Phulpur. With this new pipeline network, these CBM gas fields are now connected with the Indian Gas Grid.