April 21 (Bloomberg) -- Reliance Industries Ltd., India's biggest company by market value, reported profit that missed analysts' estimates for the first time in nine quarters after earning less from making chemicals.

Net income rose 24 percent to 39.1 billion rupees ($979 million) in the three months to March 31 from 31.6 billion rupees a year earlier, the Mumbai-based energy and petrochemicals group said in a statement to the Bombay Stock Exchange today. That missed the mean estimate of 23 analysts surveyed by Bloomberg News for 40.8 billion rupees profit.

Reliance shares fell for the first time in 15 quarters in the period as record oil prices raised the cost of making petrochemicals such as ethylene, used in plastics. Earnings growth may accelerate after billionaire Chairman Mukesh Ambani completes the world's largest refinery complex and starts output at India's biggest gas field that may yield more of the fuel than the Gulf of Mexico, according to Macquarie Bank estimates.

``The upside will come in from their upstream and their new refining capacity,'' said Mahesh Patil, who oversees $800 million in stocks as fund manager at Birla Sun Life Asset Management in Mumbai. By this time next year, oil and gas will contribute significantly to revenue, he said.

Refining Margins

Reliance will complete the refinery this year in Gujarat, western India, to process oil into gasoline, diesel and naphtha for export to the U.S., Europe and the Middle East. Ambani earns more from each barrel of oil than overseas refiners by processing cheaper, lower grades of crude at a plant two days away by ship from Middle East oil fields.

Birla acquired 53,000 Reliance shares in the three months ended March 31, raising its holding to about 830,000, according to data compiled by Bloomberg. Reliance's 21 percent decline in the quarter mirrored the fall in India's benchmark Sensitive Index as concerns about a global recession caused the worst start to the year in Indian equities since at least 1979.

Profits from processing naphtha into ethylene have slumped about 69 percent for Asian producers since last year, according to consulting firm Chemical Market Associates Inc. Naphtha has risen 38 percent in the past year, according to Bloomberg data.

Fourth-quarter sales rose 36 percent to 373 billion rupees. The margin from petrochemicals in the fourth quarter declined to 10.4 percent from 11 percent a year earlier, Reliance said. Petrochemical production rose 8 percent to 5.1 million tons.

``We think our petrochemical margins are as low as they can get,'' Alok Agarwal, Reliance's chief financial officer, said today. Paraxylene margins fell by almost $240 a ton, he said.

Chemical Projects

Ambani, the second-richest Indian according to Forbes magazine, need higher profits to fund $24 billion of planned investments in chemical projects in the gas-rich Middle East and increase oil and gas exploration to benefit from record energy prices.

The investment plans may help to triple earnings in the next five years, Jal Irani and Amit Mishra at Macquarie, the second- ranked analysts tracking Reliance, said in an April 11 report.

Reliance gained 0.1 percent to 2,643.6 rupees on the Bombay Stock Exchange, compared with a 1.6 percent gain in the benchmark Sensitive Index. The stock has fallen 8 percent this year. The earnings were announced after markets closed.

Oil and gas discoveries may help Reliance's stock resume a rally that saw the counter more than double last year, making Ambani, 51, the world's fifth-richest person, according to Forbes. The shares have risen sevenfold in the past three years.

Reliance earned $15.5 from processing a barrel of oil into fuel in the fourth quarter, compared with $7 for a plant in Singapore, the company said.

Energy Prices

Crude oil prices in New York rose above $117 a barrel for the first time today and are up 77 percent from a year ago. The Organization of Petroleum Exporting Countries said yesterday there is no shortage of oil in the market. OPEC blamed the weak dollar and speculators for high prices.

Record profits will help Reliance secure funds to start the new refinery, adjacent to an existing facility, and begin natural gas production. The two businesses involve an investment of $11.3 billion, equivalent to about 11 quarters of profit from refining and chemicals.

Reliance plans to add three rigs to the four operating at the Krishna Godavari fields in the Bay of Bengal, off India's east coast, this year. The company pays $500,000 to $530,000 a day for rigs that can drill in ultra deep waters, Agarwal said.

Reliance said last year it plans to spend $5.2 billion to explore the offshore fields.

Gas Shortage

``The company is brilliantly positioned to make a lot of money from the gas business,'' said Jon Thorn, who manages $450 million in equities at India Capital Fund in London and doesn't disclose which shares he owns. ``India is short of gas and they are going to capitalize on that.''

Reliance Petroleum Ltd., the unit that's building the refinery, said on April 16 the project will be completed before December. Reliance Petroleum spent 233.2 billion rupees as of March 31, against a projected 221.3 billion rupees.

The 580,000-barrel-a-day refinery, when combined with the adjacent, 660,000-barrel-a-day plant owned by the parent in Jamnagar, will make it the world's biggest refinery complex, according to Reliance.

Reliance added 47 outlets during the year for a total of 1,432 selling gasoline and diesel in the country. The company said margins remain under pressure because state-run refiners sell fuel below cost.

Reliance sells gasoline for as much as 14 rupees more a liter than state-run rivals, the company said.

Profits from the flagship oil refining business will also fund Reliance's new businesses in shopping malls, supermarkets and agriculture.

Marks & Spencer Group Plc, the U.K.'s largest clothing retailer, announced April 18 a joint venture with Reliance, which will open at least 50 stores in India over five years.

Reliance Retail Ltd. operates 590 stores in 57 Indian cities, according to the statement.

To contact the reporters on this story: Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net; Manash Goswami in New Delhi at mgoswami@bloomberg.net.

Last Updated: April 21, 2008 10:08 EDT