eliance Industries third-quarter profit surged 39 per cent to Rs. 7,290 crore, an eight-year high, helped by a fall in global crude oil prices.
The Mumbai-headquartered oil-to-retail conglomerate earned $11.50 for every barrel of crude it processed during the quarter, the highest in seven years, compared to margins of $7.3 a barrel a year earlier.
Reliance, headed by billionaire Mukesh Ambani, which was India’s most profitable firm till December 2014, had lost its position to TCS and then to state-owned Indian Oil Corporation (IOC) in June 2015. During this December quarter, Tata Consultancy Services (TCS) reported a net profit of Rs. 5,957 crore.
The profit “to put things in perspective, is over 20 per cent higher than the second best this quarter,” RIL CFO Alok Agarwal told The Hindu.
The company posted a 24 per cent fall in revenue during the December quarter to Rs 73,341 crore but the operator of the world’s biggest refining complex saw margins widening on turning crude into fuels due to falling crude oil prices.
Refining contributes a significant two-third of RIL’s profits and 70 per cent of its revenues. Refining and marketing business saw 99 per cent growth in EBIT to Rs. 6,491 crore while petrochemicals segment saw 28 per cent growth in EBIT to Rs. 2,639 crore.
“The benefits of low crude oil and energy prices for our downstream businesses clearly outweigh the impact of these factors on our upstream segment, reflecting in the record earnings for the quarter,” said RIL chairman Mukesh Ambani. Ambani’s personal wealth grew most in the world as crude oil prices fell.
Mr. Ambani’s net worth increased by $620 million as of January 15, the most in the world in 2016, according to the Bloomberg Billionaires Index, making him the only Indian billionaire among the 13 Indian billionaires in the world’s richest 400. Profits from oil and gas business continued to fall on declining production from its KG D-6 block.
RIL saw its EBIT from oil and gas business falling 90 per cent to Rs 90 crore, while the company registered 10.5 per cent growth in EBIT from organised retail to Rs 147 crore.
“RIL reported better than expected earnings while gross refinery margins at $11.5 per barrel came in line with expectations. We rate the stock as neutral as the expected Rs. 1 lakh crore proposed investment in telecom is yet to start contributing to cash flows and is currently a drag on return ratios. Stronger gross refinery margins in this quarter should keep up the excitement as will clarity on commercial launch date and news flow on Jio,” said Ravi Shenoy VP- Midcap Research at Motilal Oswal Securities.
Debt of the company rose to Rs 17,8077 crore ($26.9 billion). It is one of the most indebted companies with cash and cash equivalent of Rs 91,736 crore ($13.9 billion), or a little more than half of its total debt.
Mukesh Ambani along with other promoters of Reliance Jio on Monday decided to infuse Rs 15000 crore in the company through rights issue to improve its debt equity ratio.
Reliance is is readying itself for the commercial start of Rs one lakh crore telecommunications venture in the next couple of months.