The refining and petrochemicals businesses of Reliance Industries have put up a better-than-expected performance in this March quarter. Operating profits in these segments have grown marginally on a sequential quarter basis. Despite plant shutdown for some time during the quarter, improved product cracks helped the company achieve gross refining margin (GRM) of $7.6 a barrel against $6.8 in the December 2011 quarter. The petrochemicals business benefitted from increased sales volumes (8 per cent sequential growth) which more than offset margin pressure in the segment.
But the oil and gas exploration business has once again proved a drag on the company’s overall performance. With gas production in the KG-D6 fields in continuous decline (around 35 mscmd currently compared with 40 mscmd in the December quarter and around 50 mscmd in March last year), the segment’s profit has dipped by a sharp 26.5 per cent on a sequential quarter basis.
Operating margin in the segment has also fallen sharply from around 46 per cent to 37 per cent.
This has primarily led to the company’s overall profits to fall around 4.6 per cent sequentially.
Other income softens blow
On a year-on-year basis, RIL’s profits have dipped around 21 per cent, again primarily due to the poor show by the oil and gas segment.
Overall performance would have been much worse but for the sharp sequential increase of almost 34 per cent in ‘other income’. This income accounted for as much as 54 per cent of the company’s profits in the March quarter, up from 39 per cent in the December quarter. Interestingly, ‘other income’ increased despite a dip in cash and cash equivalents from Rs 74,539 crore in December to Rs 70,252 crore as on March, and an almost three per cent fall in ‘interest income’. This suggests increased profits from the company’s other operations.
The progress in the share buyback programme announced by the company in January has made only minor progress. Just little over three per cent of the approved share quantity has been bought back till the end of the March quarter. The average acquisition price for the buyback works out to around Rs 760 a share, as against the maximum price of Rs 870 mentioned in the buyback announcement.