Reliance Industries Sees Lower Revenues In Q4FY13

India's largest private sector company by revenue, Reliance Industries, posted a 32 % rise in its net profit on a yearly basis in the fourth quarter of FY13. The company's net profit increased from Rs 4236 crore (Q4FY12) to Rs 5589 crore (Q4FY13). However, similar growth was elusive in the topline in the same period, which declined marginally by 1% against the market expectations of a 7%-8% rise.

The decline in overall revenues was primarily driven by drop in revenues from the oil & gas segment, which declined by a huge 39% to Rs 1597 crore. Nonetheless, the impact of such a severe fall was limited due to the lower contribution of this segment (a mere 2%) to the overall revenue of the company. The other major segment, Petrochemicals, which contributed 22% of the total revenue, saw a 3% rise in revenue in the same period to Rs 22158 crore. This is below what the street was expecting. Revenues from refining, which accounts for a little more than three quarter of the total sales, went up to Rs 77872 crore, up by a marginal 2% on a yearly basis.

Despite the tepid growth in its topline, however, RIL was able to post a respectable bottomline on the back of better refining margins and stable Other Income. Of all the three segments discussed above, the company was able to improve its EBIT margins on a yearly basis only in refining. The EBIT for the refining segment improved to 4.5% for the recent quarter from 2.2% in the same quarter last year. It improved on the back of higher gross refining margins (GRMs), which increased from USD 7.6/bbl for Q4FY13 to USD 10.1/bbl in the recently concluded quarter. In the same period, the margins in the petrochemicals and oil & gas segment declined to 8.6% and 28.8% respectively from 10.2 % and 36.5%. Overall, the EBITDA margins of the company improved from 7.7% to 9.3% for Q4FY13 on a yearly basis.

We are of the opinion that the quarterly numbers posted by RIL is not reflecting the expectations that the market has built up in its share prices in the last couple of trading sessions. While the shares may not tank due to better profit figures, any rise would also be limited from here on.