Reliance Industries (RIL) profit to rise for first time in five quarters

Reliance Industries (RIL) is expected to post its first quarterly profit increase in five quarters on the back of higher gas production from fields off India’s east coast (KG Basin). RIL should benefit as refining margins recover after almost halving in the December quarter, and as gas output from the Krishna Godavari (KG) basin reaches a peak of 80 million standard cubic metres a day (mmscmd) by April. The gas business will help RIL’s bottomline for this quarter and for many years to come.  New gas discoveries are also going to coming up frequently.

RIL’s earnings will also be helped by the acquisition of subsidiary Reliance Petroleum Ltd, which commissioned a new 580,000 barrels per day (bpd) refinery in December 2008. The plant forms part of the world`s largest refining complex, sitting alongside RIL’s older 660,000 bpd plant at Jamnagar in western India. Analysts reckon Reliance`s gross refining margins, a key measure of profitability, will have nearly halved to $5.3 a barrel in the December quarter, tracking the decline in Asia’s benchmark Dubai crack margin. The refining business is cyclical, and likely to improve in the coming quarters.

And to boost growth inorganically, RIL, which is India’s top refiner and petrochemicals producer is looking to buy bankrupt LyondellBasell for around $13.5 billion to give it greater access to lucrative Western markets. Though the acquisition may not be possible under $15 billion given competition from other private equity firms.