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A 33 per cent year-on-year rise in ‘other income’ — aided by higher interest rates on a massive cash hoard — salvaged the performance of Reliance Industries (RIL) in the recent December quarter.
Other income accounted for one-third of the company’s profit before tax, up from one-fourth a year ago. This, combined with the benefit of a weak rupee, enabled RIL post flat profit growth and offset the poor show by the core businesses.
The petrochemicals segment, which did well in the September quarter, saw its December quarter volumes fall or remain flat due to weak domestic demand. But the segment managed 10 per cent higher profit year-on-year, thanks to higher prices, aided by a weak rupee.
No such luck for the refining segment, the company’s largest profit contributor, which took a hit on both volumes and price.
In a tough market environment which saw the benchmark Singapore complex margin fall to a three-year low of $4.3 a barrel, RIL managed to maintain its gross refining margin at $7.6 a barrel, around the same levels as the September quarter. But this was 21 per cent lower than the margin a year ago. The oil and gas business continued its poor run due to the production woes in the KG-D6 field; its profit fell nearly 9 per cent over the year-ago period.
But there are silver linings. One, RIL’s shale gas ventures in the US are gaining momentum with the December quarter volumes growing 18 per cent sequentially.
Also, the retail business revenues rose nearly 40 per cent year-on-year and its operating profit picked pace. The benefits from these will be reflected in the company’s consolidated performance.
More importantly, with the government hiking prices for the KG-D6 gas from April 2014, the oil and gas segment’s performance should improve.
Meanwhile, the company is investing in the cyclical refining and petrochemicals businesses – this should yield dividends when the cycle turns. RIL is also investing in the telecom business where it has got unified license across the country. These would have helped moderate the company’s cash reserves from Rs 90,540 crore in September to a still formidable Rs 88,705 crore as on December end.
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