Reliance Industries (RIL), India’s most valuable company, on Friday announced results for the quarter ended June largely in line with market expectations, riding on higher margins from its core refining business, besides the rupee depreciation and higher other income.
At Rs 5,352 crore, net profit was up 18.9%, as gross refining margin (GRM) rose to $8.4 per barrel compared with $7.6 a barrel in the quarter ended March.
GRM, the difference between the cost price of crude and selling price of refined products, is the most important metric for calculating a refinery’s profitability.
Other income – mainly from deployment of the huge cash pile on its books – too was up at Rs 2,535 crore compared with Rs 2,243 crore in the previous quarter and Rs 1,904 crore in the year-ago period. The company’s cash and cash reserves stood at Rs 93,000 crore at the end of June.
On the other hand, the rupee averaged 55.96 against the dollar during the quarter, a depreciation of around 3.5% compared with 54.06 a year ago.
Profit before depreciation, interest and tax (PBDIT) stood at Rs 9,610 crore, up 10.3% on-year.
However, total revenue was down 4.6% at Rs 90,589 crore.
Refining revenues, which account for 77% of the pie, too were down 4.6% on-year at Rs 81,458 crore.
Revenues from petrochemicals – accounting for 20% of the pie – grew 0.5% to Rs 21,950 crore.
Lower oil prices during the quarter had some impact on the earnings from refining, Alok Agarwal, chief financial officer, Reliance Industries, said.
The company’s oil & gas business, which saw production in the key KG-D6 block decline to 15.3 million metric standard cubic metre per day (mmscmd) during the quarter (it has since fallen further to 14.2 mmscmd), contributed Rs 1,454 crore, down 42% on-year, after having taken a 39% knock the previous quarter.
“Fall in production is mainly attributed to geological complexity, natural decline in the fields and higher than envisaged water ingress,” RIL said.
Revenue from its shale gas venture in the US, however, rose 84% as production increased.
Agarwal said the US shale gas operation is growing fast and already equals its domestic gas output. The price of shale gas, too, averages more than its domestic gas price due to the presence of liquid components, which sell at a higher price, he said.
Indeed, it is shale gas and the domestic retail operations that the company is most bullish on today, said Agarwal. “While shale is showing a strong momentum, our returns from like-to-like stores in retail operations is the highest in the industry currently.”
RIL’s retail business turnover grew 53% on-year during the quarter to Rs 3,474 crore. It continued to be positive on income from operations with a PBDIT of Rs 70 crore.
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