By Dow Jones Business News, October 14, 2013, 09:55:00 AM EDT
Reliance Industries Ltd. (500325.BY), India's largest company by capitalization, said Monday its profits were little
changed last quarter as the sliding profitability of its refining business offset better profits in its petrochemical
Reliance posted a net profit of 54.90 billion rupees ($894 million) for the July-to-September quarter, the second
quarter of its fiscal year. That is just 1.5% above the 54.09 billion rupees it made a year earlier. Meanwhile the
company's sales rose 15% to 1.04 trillion rupees.
Chairman Mukesh Ambani attributed the rise in profit partly to improved margins in the petrochemical business.
Reliance's slow growth shows the company is facing challenges in its core businesses, refinery and petrochemicals,
analysts said. Its exploration and production business is also being hurt by falling production at a natural gas field
off India's east coast.
Revenue from the company's exploration and production business fell 35% from the year earlier as India's largest gas
deposit, which is operated by Reliance, is experiencing a decline in output. Reliance said its gas output from the
Krishna-Godavari basin off the east coast fell about 52% to 94.6 billion cubic feet during the first half of the fiscal
year that will end March 31, 2014.
Reliance is investing in sectors such as telecommunications, retail, security, financial services, hotels and media as
it seeks to diversify its revenue sources. The company wants to lower its dependence on India's heavily regulated oil
and gas sector. It has also purchased stakes in shale gas assets in the U.S.
At the company's annual shareholders meeting earlier this year, Mr. Ambani, India's richest man, outlined a three-year
investment plan of INR1.5 trillion.
Even as Reliance is looking to diversify, its future earnings will still be tightly tied to its refining businesses,
"Future quarters" profitability will depend largely on the improvement of gross refining margins, deployment of cash
and KG-D6 basin gas production volumes revival," Jagannadham Thunuguntla, head of research at SMC Global Securities Ltd.
said in a report.
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