Reliance Industries down 2% on Q4 revenue decline

[bhushan sharma]

Reliance Industries' shares declined over 2 percent to Rs 787.60 after its Q4 revenues declined 1.4 percent, while profit grew 32 percent year-on-year.

However, even as reliance industries  (RIL) posted a significant year-on-year rise in its March quarter profit boosted by higher other income and an improvement in gross refining margin, it's exploration and production division may continue to be a drag in ensuing quarters, say analysts.

Analysts who met RIL management post Q4 earnings announcement said there is no news on further exploration in KG-D6. Currently, volumes are already low at around 16 million standard cubic metres per day (mmscmd) and there will not be any meaningful impact on overall profitability even if volumes improve slightly going ahead.

Petchem vertical's Q4 performance was also slightly disappointing due to pressure in domestic polyester margins, the management has re-iterated spending USD 12 billion across petchem and refining segments

Gross refining margins (GRMs), the difference between the cost of processing crude and value of finished petroleum products sold, rose to USD 10.1/bbl from USD 7.6/bbl YoY, led by improved diesel and petrol margins. This more than doubled the operating profit for the refining and marketing segment to Rs 3520 crore. However, the company may find it difficult to sustain margins due to threat of cheaper imports.

Going ahead, will RIL's new businesses impact bottomline?
RIL has already invested about Rs 9500 crore in retail business and
Around USD 570 crore in shale gas business. The combined FY13 EBITDA of the two businesses is around  USD 48.3 crore or just about 6.5 percent of the invested capital. The retail business turned positive at the EBITDA level in FY13 but continues to have negative net income. The shale gas business reported net income of USD 7.2 crore for FY13. The two businesses are growing but will not contribute significantly to bottomline so soon.