Reliance Profit Grows Fastest in 3 Years on Refining Gains

Reliance Industries Ltd. (RIL), operator of the world’s biggest oil refinery complex, reported its highest profit growth in almost three years after earnings from turning crude into fuels increased.

Fourth-quarter net income rose 32 percent to 55.9 billion rupees ($1.03 billion), or 17.30 rupees a share, in the three months ended March 31 from 42.4 billion rupees, or 12.9 rupees, a year earlier, the Mumbai-based company said today in a regulatory filing. That beat the 55.3 billion rupee median estimate of 30 analysts surveyed by Bloomberg. Sales fell 1.2 percent to 842 billion rupees because of maintenance shutdowns.

Billionaire Chairman Mukesh Ambani, 55, aims to double Reliance’s operating profit in the next five years by increasing petrochemical-producing capacity and starting phone services in the world’s second-fastest growing major market. The company lost its No. 1 position as India’s biggest by market value to Tata Consultancy Services Ltd. and Oil & Natural Gas Corp. following a three-year drop in natural gas production at its largest deposit.

“Some of the petrochemical capacity will start up this year and that’ll help earnings,” said Neelabh Sharma, a Mumbai- based analyst with BOB Capital Markets Ltd., who has a hold rating on the company’s stock. “Refining will probably stay at these levels, though gas production concerns remain.”

GDRs Gain

Reliance’s global depository receipts in London rose as much as 4.2 percent to $20.22 and traded at $30.08 as of 1:57 p.m. local time, the highest intraday price since March 18.

The local shares have declined 4.1 percent this year in Mumbai, compared with a 3.5 percent drop in the key S&P BSE Sensex Index. The loss of value has reduced Ambani’s net worth by 5.7 percent to $22.8 billion, according to the Bloomberg Billionaires Index. The stock rose 1.4 percent to 804.95 rupees in Mumbai trading today. The earnings were announced after the market closed.

Reliance, which announced a dividend of 9 rupees a share, earned $10.10 for every barrel of crude it processed in the quarter, compared with $7.60 a barrel a year earlier and $9.60 a barrel in the previous three months. Profit from turning Dubai crude into diesel in Singapore, an Asian benchmark, averaged $19.39 a barrel in the quarter, compared with $16.81 a year earlier, according to data from PVM Oil Associates Ltd., a London-based crude and refined-products broker.

High-Value Fuels

Reliance runs two refineries at Jamnagar in the western state of Gujarat that can together process 1.24 million barrels of crude every day. The plants are capable of turning heavier grades of oil, which are typically cheaper, into high-value fuels. The company shut a crude unit, a diesel hydrotreater and a VGO unit at its newer refinery in Jamnagar on Feb. 18 for about four weeks, according to a statement.

Brent crude, a benchmark oil price used by much of the world, averaged $112.64 a barrel in the three months ended March 31, compared with $118.45 a year ago. Oil markets will be balanced this year with Brent at about $100 a barrel in Europe where demand is falling, Ibrahim al-Muhanna, an adviser to Saudi Arabian Oil Minister Ali al-Naimi, said April 10.

Reliance, which borrowed an unprecedented $5.8 billion overseas in 2012, is set to spend $27 billion in five years to build petrochemical plants and drill wells, Deutsche Bank AG estimates. It will invest $11 billion for energy exploration, $8 billion to expand petrochemical output and a combined $8 billion in its refining, retail and communications businesses, Deutsche Bank estimates. The firm will spend about 1 trillion rupees in five years, Ambani told shareholders in June.

Cash, Equivalents

Reliance had cash and equivalents of 829.8 billion rupees, deposited in bank deposits, mutual funds and government securities as of March 31, the company said. That surpassed its 724.3 billion rupees of debt outstanding.

The company and its partner BP Plc plan to spend more than $5 billion in the next three to five years to develop gas discoveries in the KG-D6 block off India’s east coast, Reliance said today. Gas production from the block in the Bay of Bengal declined 39 percent to 336 billion cubic feet in the 12 months ended March 31 from a year earlier. The drop was spurred by reservoir complexity and a natural decline in output, it said.

Reliance’s plan to increase production may get a boost should the government accept the recommendations of a panel led by Chakravarthy Rangarajan, chief of the prime minister’s Economic Advisory Council. The panel wants gas rates in India to be benchmarked to global rates, which will increase prices to about $8 per million British thermal units.

Reliance sells fuel from the KG-D6 block for $4.2 per million Btu, a price which comes up for revision in April 2014.

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

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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