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RIL Approves $2.1-Bn Buyback As Q3 Profit Dips 14%

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Reliance Industries, India's biggest company by market value, reported a 13.6 per cent fall in October-December net profit, its first quarterly profit drop in more than two years, as refining margins fell sharply. Reliance also said its board approved spending up to Rs 10,440 crore ($2.1 billion) to buy back shares, as it sought to bolster its underperforming stock. Reliance said it will buy back up to 12 crore equity shares from the open market at a maximum price of Rs 870 apiece in its first share buyback since 2005. The current share price is Rs 793 per share. This is the fourth time the company has announced a buyback of shares. The company's buyback offer is less than the street expectations. Controlled by Mukesh Ambani, the world's ninth richest person according to Forbes, Reliance's market value tumbled 35 per cent in 2011, mainly over growth worries as output from its offshore gas fields slowed sharply from the previous year. The stock has underperformed the main Mumbai market, which fell nearly 25 per cent in the same period. The last time Reliance Industries announced a share buyback was in December 2004. The maximum buyback price announced in 2004 buyback program was at Rs 285 per share (that is, prebonus price of Rs 570 per share). The stock has been under-performing the broader market by a wide margin in recent months, but has been on an upward journey in last couple of trading sessions. In the recent past, it has traded below Rs 700 level also for the first time in last few years. Late last month, RIL was also briefly replaced by Tata group firm TCS as the country's most valued firm, while earlier in December it was overtaken by IT giant Infosys as the most influential stock on the market barometer Sensex. Falling Profits Reliance, India's biggest company by market value, said net profit fell to Rs 4,440 crore or Rs 13.6 a share, in the third quarter ending December 31 from Rs 5,136 crore a year earlier. Net sales rose 42 per cent to Rs 85,135 crore. It reported gross refining margins of $6.8 a barrel for the quarter, compared with $9 a barrel a year earlier, and sharply lower from the $10.1 per barrel it reported in the September quarter. "The global nature of our businesses and weakness in economic conditions resulted in reduced earnings in the quarter, particularly in our refining and petrochemicals businesses," Reliance Chairman Mukesh Ambani said in a statement. The company operates the world's biggest refining complex in western India, which can handle less costly high-sulfur crude oil, giving it among the best refining margins in the industry. The refining segment accounts for nearly 80 per cent of Reliance's revenues. The margins, a key measure of profitability, were impacted by higher crude prices and narrowing spread between light and heavy crude prices. Reliance's oil and gas exploration business posted a 32 per cent decline in revenue, mainly on account of lower production at its main D6 offshore block. The company's growth outlook has been marred by falling gas output from its huge gas fields off India's east coast. The company is producing around 40 mscmd (million standard cubic metres per day) of gas, sharply lower than the 60 mscmd it was producing a year earlier. The lacklusture quarterly earnings and the below market expectation share buyback plan were announced after the close of trading on the stock exchanges, where the company stock closed at Rs 792.65, up 0.9 per cent. RIL earned $6.80 on turning every barrel of crude oil into petroleum products (fuel) in Q3, FY'12, compared to a $9 a barrel gross refining margin in the corresponding period of the previous fiscal. The refining margins were lower than the Singapore benchmark average of $7.3-7.4 per barrel, a phenomenon which the firm blamed on lower demand and weaker product cracks. The company had earned $10.1 a barrel in the preceding July-September quarter. Natural gas production from its showpiece KG-D6 fields off the Andhra coast fell by 23 per cent to 136 billion cubic feet per day (41.92 million cubic metres per day) in Q3 from 54.5 mmcmd a year ago. (With Agencies)