Reliance Slumps to 33-Month Low on Earnings, Gas Output Concern

Reliance Industries Ltd. (RIL), operator of the world’s biggest refinery complex, declined to the lowest in 33 months on concern lower refining profits and falling natural gas output may drive down earnings.

The shares (RIL) declined 2.7 percent to 692.95 rupees at close in Mumbai, the lowest since March 20, 2009. The stock has dropped 35 percent this year, the most since 2008, compared with a 25 percent slide in the benchmark Sensitive Index. (SENSEX) Today’s decline has dropped Reliance down a notch to become India’s second-largest company by market value after Tata Consultancy Services Ltd. (TCS)

Reliance, controlled by billionaire Mukesh Ambani, is struggling to reverse a decline in gas output from the nation’s biggest deposit, which resulted in the company missing analysts’ estimates (RIL) three times in the last four quarters. Net income this quarter may also be affected because of lower refining margins, said Alok Deshpande, a Mumbai-based analyst at Elara Securities Ltd.

“They have been banking on refining margins to boost profits, which are going to be disappointing this quarter,” Deshpande said. “Gas output continues to be lower. There isn’t any great news about Reliance.”

Margins (NBTOSPDU) of complex refiners in Singapore processing Dubai crude have averaged $4.6 a barrel this quarter, 26 percent lower than the three months ended Sept. 30. The margin rose to this year’s high of $9.64 a barrel on Oct. 5.

Reliance operates two refineries located at Jamnagar in India’s western state of Gujarat. The plants, with a capacity to process 1.24 million metric tons of oil, can turn cheaper heavy grades of crude into high-value products. Reliance earned $10.1 for every barrel of crude it turned into fuels in the quarter ended Sept. 30, compared with $10.3 a barrel in the preceding three months.

The company is producing about 38 million cubic meters a day of gas from the KG-D6 block off India’s east coast, Oil secretary G.C. Chaturvedi said Dec. 21. Output from the field was about 45 million cubic meters a day in the three months ended Sept. 30 and 60 million cubic meters in June last year.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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