RIL Profit Jumps Despite Decline In Revenues

Mukesh Ambani led Reliance Industries has reported a 20% jump in its net profit despite a 5% decline in revenues. The net profit at Rs 5352 crore came in better that expected. Most analysts were expecting a net profit of Rs 5279 crore for the June 2013 quarter this year.

For the first quarter of the current fiscal, the company has reported total revenues of Rs 87645 crore, down by 4.6% on a YoY basis. The company has seen a 4.6% decline in its refining business which contributes to more than 75% of its total revenues. The performance of the refinery business remained subdued due to lower crude oil processing at its Jamnagar refinery. Revenues from the petroleum business have remained flat at Rs 21950 crore while its third business segment (oil and gas) has seen a 42% YoY decline due to a consistent fall in the KG-D6 output.

On the margin front, the overall EBITDA margins have shown an improvement of 73 basis points. The PBIT margins of Petrochemicals were at 8.6% against 8.04% in the corresponding quarter of the last fiscal. The refinery business has also shown remarkable improvement of 110 basis point in its PBIT margins. Those of the oil and gas segment have shown a steep decline.The key highlight of the results is the higher proportion of other income in the net profit. During the quarter, the company has achieved total other income of Rs 2535 crore which has contributed 47% in its net profit which is highest in its history. RIL also reported gross refining margin (GRM) of USD 8.4 per barrel against USD 7.6 in the same quarter last year.

The company, in its press release, has said that it is in the process of launching 4G services and that it will utilise the 45,000 mobile network towers of Reliance Communications. It has also said that the new well that it drilled in the KG-D6 basin has yielded positive results.

The results should be seen positively by the markets considering the jump in the EBITDA margins, new discovery as well as the company’s entry into 4G services. We expect the stock to show a gap-up opening on Monday.