Reliance Industries Ltd (RIL), the country?s largest private sector conglomerate, is expected to report a 10-15% surge in profits for the fourth quarter of the financial year, compared to the third quarter.
The surge in profits will mainly be facilitated by its petrochemicals business and marginally improved refining margins. RIL had posted a net profit of Rs 3,501 crore for the third quarter of FY09.
In February, RIL had said its profits for the third quarter would have been lower by Rs 39 crore had it followed the Accounting Standard 11 (AS 11) as prescribed by the guidelines on ?effects of changes in foreign exchange rates? notified in the Companies Rules (accounting standards) 2006.
Analysts believe that RIL?s gross refining margins (GRMs) will marginally improve to $10.5-a-barrel, as against $10-a-barrel in the third quarter, despite the downturn. RIL’s GRM will average around $3.5-$3.8 per barrel above the benchmark Singapore complex margins.
Yogesh Garg, CEO of Infraline, said, ?RIL has already made investments in dollar denominated currency on the KG-Basin oil fields.?
?The revenues from the KG-Basin will be in domestic currency due to domestic consumption by power and fertiliser companies. Forex gains or losses can be anticipated only when RIL starts selling gas to other countries,? he noted.
The country will save $9 billion (Rs 45,900 crore) in oil imports each year when the KG-Basin oil fields start producing 80 million cubic metres of gas per day by 2010. RIL has invested nearly $8.835 billion (Rs 45,058.5 crore) in the KG Basin.
Garg further said that when RIL had designed the complex refinery at Jamnagar, they had calculated profits taking an average price of crude oil between $45-55 a barrel.
Therefore, even if the high crude oil prices have retreated, it will not impact profits of RIL in a major way.
Comparing the fourth quarter of FY09 with the corresponding quarter of the last financial year, Garg said that during that time RIL had posted a profit of Rs 3,912 crore and was engaged in investments in its exploration and production business.
The company?s balance sheets will see incremental profits in the ensuing financial years when it starts producing and selling gas in full swing from its oil fields.
Deepak Pareek, an analyst with Angel Broking, said, ?There has been robust demand for petroleum products worldwide. The company will sustain its refining margins due to better sourcing of crude, flexibility in crude bucket and other refining related infrastructure.?
Another analyst said that RIL has one of the best complex refineries and will remain a key contributor to the positive growth of the economy in the ensuing financial year.
?Despite low crude oil prices, the oil and gas major will post profits since it incurs low extraction costs,? said the analyst, adding that its merger with RPL (Reliance Petroleum Ltd) will not have any impact on the quarterly results, since RPL has not begun production yet.
Leveraging KG-D6
• Surge will be facilitated by petrochem biz
• RIL posted a profit of Rs 3,501 cr in 3Q FY09
• Analysts believe that RIL’s gross refining margins will improve to $10.5-a-barrel
• It was $10-a-barrel in the third quarter
• Merger with RPL will not have any impact on the quarterly results