Reliance Profit Beats Estimates for Fifth Quarter as Rupee Falls

Reliance Industries Ltd.’s profit beat analyst estimates for the fifth straight quarter as the rupee’s plunge to a record boosted dollar-denominated earnings at the operator of the world’s biggest oil refinery complex.

Net income rose 19 percent to 53.5 billion rupees ($900 million), or 16.60 rupees a share, in the three months ended June 30 from 45 billion rupees, or 13.80 rupees, a year earlier, the Mumbai-based company said yesterday in a filing. That exceeded the 52.5 billion rupee median estimate of 36 analysts surveyed by Bloomberg. Sales fell 4.6 percent to 876.5 billion rupees.

Reliance, which produces natural gas from India’s biggest deposit, will also benefit from higher prices starting April next year as Prime Minister Manmohan Singh’s administration seeks to cut imports by boosting the nation’s output from local fields. Reliance’s billionaire Chairman Mukesh Ambani, 56, told shareholders last month he plans to spend 1.5 trillion rupees over the next three years to expand businesses ranging from gas to telecommunications.

“The rupee gains pushed up other income and that probably helped beat estimates,” said Kamlesh Kotak, Mumbai-based head of research at Asian Market Securities Pvt. “Things are in place for them the next few quarters and the gas price increase from next year will benefit them some more.”

The shares increased 0.7 percent to 923.70 rupees, the highest since June 2011, in Mumbai yesterday. The stock has gained 10 percent this year, compared with the 3.7 percent increase in the benchmark S&P BSE Sensex index. The earnings were announced after the close of trading.

Lower Spending

Reliance, which cut spending 5.5 percent to 827.1 billion rupees in the quarter, earned $8.40 for every barrel of crude it processed, compared with $7.60 a barrel a year earlier and $10.10 a barrel in the preceding three months. Profit from turning Dubai crude into diesel in Singapore, an Asian benchmark, averaged $16.26 a barrel, compared with $16.06 a year earlier, according to data compiled by Bloomberg.

Other income increased 33 percent to 25.4 billion rupees in the quarter from 19 billion rupees a year earlier on sale of investments, the company said.

Reliance’s two refineries at Jamnagar in the western state of Gujarat can process a combined 1.24 million barrels of crude daily. The plants are capable of turning heavier oil grades, which are typically cheaper, into high-value fuels.

Brent crude, a benchmark oil price used by much of the world, averaged $103.35 a barrel in the three months ended June 30, compared with $108.76 a year ago.

Dollar Sales

Much of the output from the refineries are exported and sold in the U.S. currency. A stronger dollar increases Reliance’s earnings in rupees. The company is India’s biggest exporter, accounting for 14 percent of total shipments, Ambani said at the shareholders’ meeting June 6. Reliance also sells its gas in India in dollars.

The rupee fell 8.6 percent in the quarter ended June 30, making it the worst performer among Asia’s major currencies. It touched an unprecedented low of 61.2 against the dollar July 8.

Reliance had debt outstanding of 803.1 billion rupees as of June 30, compared with 725.3 billion rupees on March 31, the company said. Cash and equivalents held in banks, mutual funds and government securities totaled 930.7 billion rupees.

Gas Price

India’s cabinet agreed on June 27 to increase the price of natural gas as it seeks to augment exploration of the clean-burning fuel. The new rates will be effective April 1, 2014, as a weighted average traded gas prices in the U.S. and U.K. and imports by Japan and India in 2013, Oil Secretary Vivek Rae said. The price may be as high as $8 per million British thermal units next year from $4.2 per million Btu now, he said.

The higher price will increase Reliance’s earnings per share by 5.3 rupees at the current rate of output, according to Niraj Mansingka and Kiran Tulasi, Mumbai-based analysts at Edelweiss Securities Ltd. A higher price may also help the company increase production that has declined for three years.

Gas production from its biggest block in India, KG-D6 in the Bay of Bengal, fell 53 percent to 49.2 billion cubic feet in the quarter from a year earlier, Reliance said. Oil production from the block dropped 41 percent to 500,000 barrels.

Reliance has been selling the gas at $4.2 per million Btu since it started production in April 2009.

The company also operates retail stores that sell fruits and clothes and is planning to start a fourth-generation telecommunications service. Revenue at the retail business grew 53 percent to 34.7 billion rupees in the quarter. The unit, which was started in 2006, reported its first profit in the fiscal year ended March 31.