Reliance Industries’ near-flat profit in the March quarter despite sales growth of 13 per cent year-on-year was primarily due to the sharp 9 per cent reduction in ‘other income’ – the company’s saviour in the December quarter.

Its share in the company’s profit before tax dipped to 28 per cent from 31.5 per cent a year ago. Not aiding matters was the continuing poor show by the domestic oil and gas business that saw profit fall 18 per cent year-on-year. Also, the gross refining margin at $9.3 a barrel, while much higher than the $7.6 in the December quarter, was still below the $10.1 in the previous March quarter.

Rupee support

What saved the day, for the third quarter in a row, was the weakness in the rupee. This propped up RIL’s rupee realisations from exports and enabled the refining and petrochemicals segments to report 10–12 per cent growth in sales and profit.

But there were encouraging signs too. One, the company’s formidable crude oil sourcing abilities and high complexity refineries helped it do much better than the benchmark Singapore gross refining margin. While the latter grew $0.8 a barrel over the December quarter, RIL’s gross refining margin increased by a sharp $1.7 a barrel. The petcoke gasification project currently underway should improve the competitive advantage over the next two–three years.

Next, its international oil and gas business did quite well with revenue growing 20 per cent over the December quarter. In fact, the operating profit from the shale gas ventures in the US at $199 million (about ₹1,190 crore) in the March quarter was almost thrice the operating profit of the domestic oil and gas business. This is reflected in the consolidated results of the company. The gas price hike, if it happens after the elections, should provide a leg-up to the domestic exploration business too. Also, petrochemicals demand which was quite weak in the December quarter revived somewhat. The ongoing expansion of the petrochemicals capacity should aid margins in the coming years.

Retail biz picking up

The retail business is also picking momentum. The segment’s operating profit in 2013-14 was ₹ 363 crore, up from ₹78 crore a year ago. In the telecom business too, RIL is investing big and has plans to roll out services soon. Being in investment mode has kept the company’s cash hoard at ₹88,190 crore, marginally lower than ₹88,705 crore as on December-end. The market seems to be betting big on RIL’s expansion initiatives – the stock is up 20 per cent since February.

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