Mumbai: The financial performance for the quarter ended 30 September reported by Reliance Industries Ltd (RIL) announced on Saturday came in line with what the Street estimated - robust on a year-on-year (y-o-y) basis, but sequentially mute.

India’s largest company by market value reported a 15.8% y-o-y growth in net profit to 5703 crore for the quarter ended 30 September. The oil-to-yarn and retail conglomerate’s net turnover for the same period stood at 78569 crore, 36.6% higher than the year ago period.

On a sequential basis, however, the company’s results were muted, as analysts had estimated, with net profit rising 0.7%, and net turnover declining 3%.

A file photo of Mukesh Ambani, chairman, RIL

According to a note by SMS Global Securities Ltd, the rise in other income was a “positive surprise." The company benefited from the “weakening rupee and treasury income from the ample cash balances on the balance sheet," the SMC note said.

Whatever profitability squeeze the company faced on the operational front was compensated by other income, it added.

Commenting on the results, RIL chairman Mukesh Ambani said in a statement that the company’s financial performance in the first half of fiscal 2012 was “consistent."

“The increase in profits was largely driven by improved performance in the refining and petrochemicals business," Ambani said. “All our manufacturing facilities operated at record levels with refineries achieving operating rates of 110%."

S.P. Tulsian, an independent stock market analyst stated that while the company’s oil and gas and petrochemical businesses did relatively well, its refining vertical and treasury operations were big disappointments.

The gross refining margin (GRM) – the difference between the cost of crude and the value of petroleum products sold – earned by RIL came in at $10.1 per barrel, below what most analysts had expected the company to report. Brokerages had expected RIL to report a GRM of at least $10.5 per barrel or above in their earnings preview reports.

Though RIL’s GRM was 21% higher year-on-year, it was 1.9% lower than in the June quarter.

“The GRM numbers reported are rather surprising. It is probably because of the product mix," Tulsian said. A 11 October research report by ICICI Securities Ltd had estimated that the premium enjoyed by RIL’s refining margin to the benchmark Singapore GRM may decline. This was because the Singapore GRM was driven mainly by improving gasoline and fuel oil spreads and these two products formed a low proportion of RIL’s output.

RIL’s refining and marketing business saw its revenue for the quarter come down 7.5% q-o-q to 68096 crore and earnings before interest and tax (ebit) from the business decline by 3.8% to 3075 crore.

RIL’s September quarter result has also benefited from its deal with BP Plc to divest a 30% stake in its oil and gas assets to the latter.

Despite a 8.5% quarter-on-quarter (q-o-q) dip in the revenue from RIL’s oil and gas segment, the ebit from the business gained around 4%, and the margin improved 5.2% points.

According to Tulsian, the improvement in margin and ebit was a result of lower depreciation from the business arising from the company’s deal with BP Plc that led to lower depletion of oil and gas in RIL’s books.

Though revenues and ebit from the petrochemical business showed healthy y-o-y and q-o-q growth, the operating profit margin declined to 11.5% from 12.1% in the June quarter.

Tulsian stated that as long as RIL was able to sustain revenue from the petrochemical business at the level witnessed in the September quarter, a further 20-30 basis points dip in margin would not be a cause of concern. RIL earned a revenue of 21,066 crore from the petrochemicals segment in the July-September quarter.

“Overall demand for polymer products remained flat due to lower demand in some of the key end products and uncertainty around global economic conditions," RIL said in a statement.

Tulsian also raised a concern about the fiscal prudence of RIL increasing its debt and interest burden every quarter despite increasing cash and bank balances.

He pointed out that at the end of June RIL had cash and cash equivalents of around 45000 crore, which increased to around 61000 crore at the end of September. On the other hand, between March and September, its outstanding debt increased by 4002 crore to 71399 crore.

“Why would the company want to borrow more when its cash in hand is increasing, even if the debt is available at throwaway prices?" Tulsian asks.