An oil refinery. (Photographer: Jonathan Alcorn/Bloomberg)

Reliance Profit Jumps to Record as Refining Margin Expands

(Bloomberg) -- Reliance Industries Ltd.’s profit in the fourth quarter increased to a record on higher earnings from petrochemicals and oil refining.

Net income for the operator of the world’s biggest oil-refining complex rose 13 percent to 81.5 billion rupees ($1.26 billion) in the three months through March from a year earlier, the Mumbai-based company said Monday. That compares with a 80.2 billion-rupee average of 16 analyst estimates compiled by Bloomberg.

The core businesses of refining and petrochemicals are helping bankroll billionaire Mukesh Ambani’s ambitions in new areas such as telecommunications and retail. Reliance Jio Infocomm Ltd. offered free mobile services to its customers in the quarter to establish itself in the fiercely competitive Indian telecom market. Moody’s expects the business to remain a drag on the parent’s cash flows for at least the next two to three years.

“Refining margin is a big positive surprise,” said Dhaval Joshi, an analyst at Emkay Global Financial Services Ltd. “Jio’s earnings delivery will hold key to the stock’s performance going ahead.”

Reliance earned $11.5 for every barrel of crude it turned into fuels in the quarter, compared with $10.8 a barrel a year earlier, the company said. Reliance Jio reported a loss of 225 million rupees for the six month ended March 31, compared with a 74.6 million rupee loss in the year earlier period.

Complex Refineries

The company operates two refineries in the western state of Gujarat, with a combined capacity of 1.24 million barrels a day. These highly complex units can turn cheaper, lower grades of crude into high-value products.

Sales rose 38 percent to 746 billion rupees. Operating profit, or earnings before interest and tax, from Reliance’s refining business fell 1.6 percent from a year earlier to 62.6 billion rupees. Petrochemicals rose 27 percent to 34.5 billion rupees. Its earnings per share rose to 25.09 rupees from 22.27 rupees a year earlier.

Reliance shares rose 1.1 percent to 1,417.40 rupees at the close in Mumbai, while the benchmark S&P BSE Sensex Index gained 1 percent. Brent oil, the global benchmark, averaged about $54.60 a barrel during the quarter, almost 55 percent higher than a year earlier.