Other income, petrochem to save the blushes for RIL

Petrochemicals will be Reliance Industries' saving grace as weak gross refining margins are likely to impact its earnings in the December quarter.

According to an analysts' poll, the company is expected to witness a 17 percent year-on-year increase in net profit to Rs 5,200 crore and 6 percent in revenue to Rs 90,000 crore.

Adding to the poor show of the company will be the declining output from KG-D6.

[caption id="attachment_592778" align="alignleft" width="380"] Adding to the poor show of the company will be the declining output from KG-D6. Reuters[/caption]

According to a Business Standard report, apart from the petrochemical segment, the company's revenue is likely to get a boost from higher other income.

The report said RIL shares on Thursday hit a 52-week high of Rs 893.1 and closed at Rs 889.65 on the BSE, up 3.4 percent.

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"We expect RIL's GRM to expand by 31 percent yoy, but contract by 6 percent qoq to $8.9 per barrel," said brokerage BRICS in a report.

According to a note from Bank of America Merrill Lynch Singapore complex GRM at $6.5 per barrel is the lowest in eight quarters and down 18-29 percent on year and on quarter. Compared with this, RIL's expected GRM is better.

BRICS expects average gas production from D6 to decline 13 percent on quarter and 42 percent on year to 26 mmscmd and other income to rise 35 percent.

BofA ML attributes the jump in other income to increasing interest income from the rising cash. "We expect other income to be 35 percent of 3Q pre-tax profit," it said.

It sees refining EBIT rising 56 percent on year driven by a 35 percent rise in its GRM in rupee terms, petrochemical EBIT to be 14 percent lower on year and exploration and production (E&P) EBIT to be 39 percent lower.

The decline in E&P EBIT has been attributed to 36 percent lower oil and gas volumes on year.

Barclays, meanwhile, does not see a respite for the company until it raises gas prices. "Earnings may remain muted for the ensuing six quarters before the company hikes gas price to USD 9.60/mmbtu after April 2014," it said in a note.