After two quarters of lacklustre results, Reliance Industries Ltd (RIL) reported decent numbers for the December quarter. Earnings before interest, tax, depreciation and amortization (Ebitda) rose by 8.7% sequentially to Rs7,843 crore, comfortably higher than street estimates. The median Ebitda estimate of five institutional brokerages including the local units of Citigroup Inc. and Nomura Holdings Inc. stood at Rs7,338 crore.

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Of the three operating segments, the biggest surprise lay in the refining division, which reported a mere 10 cents drop in gross refining margin (GRM) compared with the September quarter GRM of $6 (Rs277) per barrel. Average refining margins in the region had fallen at a much faster pace—the average Singapore refining margin fell from $3.3 per barrel in the September quarter to $1.9 per barrel last quarter. What this means is that RIL’s premium over the regional average expanded from $2.7 per barrel in the September quarter to $4 per barrel last quarter. This is the first time in the past five quarters that this premium has risen. As a result of the better-than-expected GRM, profit of the refining segment rose by 2.4% sequentially to Rs1,379 crore. Brokers such as Motilal Oswal Securities Ltd and Prabhudas Lilladher Pvt. Ltd who give segment-wise estimates were expecting profit of the segment to fall by around 12% sequentially owing to weak GRMs.

The oil and gas exploration and production business did well, as expected, owing to the increase in production. Its profit rose by 20.5% to Rs1,477 crore, which is slightly higher than the profit of the refining division. With production set to rise further, contribution from this segment should increase.

The petrochemicals division, the largest in terms of profit, reported a 6% drop in profit to Rs2,055 crore. While prices of petrochemical products were stable last quarter, feedstock prices were higher, leading to lower product margins in the December quarter.

While the results are better than estimates, they are not likely to lead to major upgrades. This is also evident from the fact that RIL’s shares were flat after the results were announced.

Graphics by Yogesh Kumar/Mint

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