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RIL Q3 Net Jumps 24%, Beats Estimates

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Reliance Industries posted its first profit increase after four quarters of declining returns, buoyed by stronger oil refining margins.


Reliance Industries (RIL), led by Mukesh Ambani reported a 24 per cent jump in its third quarter net profit to Rs 5,502 crore against Rs 4,440 crore in the same period a year ago and Rs 5,409 crore in the previous quarter. Net sales soared over 10 per cent to Rs 95,626 crore against Rs 86,520 crore in the same period.


The company posted an average gross refining margin of $9.6 per barrel for the quarter, compared to $6.8 in the same period last year.


Reliance, which operates the world's biggest refining complex in Jamnagar, was expected to post a net profit of Rs 5120 crore, according to Thomson Reuters data. The profit rise came despite falling production at the company's key natural gas field off India's east coast and a cut in its estimated reserves by about two-thirds.


The government is expected to increase natural gas prices by 2014, a move that would help Reliance and its partner, BP Plc, justify higher expenditure on the block.


Reliance said it held $14.7 billion in cash at the end of December and had debts of $13.1 billion.


Reliance has looked to widen beyond its core energy business in recent years, and has outlined a big drive into consumer-focused sectors such as telecoms, retail, and financial services.


The company said in a filing to the stock exchanges said: "The Scheme of amalgamation of Reliance Jamnagar Infrastructure Limited (RJIL), with the company from the appointed date of April 01, 2011, has been sanctioned by the Hon’ble High Court of Gujarat at Ahmedabad. The Scheme became effective on October 22, 2012. The figures for trailing quarters have been reworked and re-stated giving effect to the amalgamation. On account of above the figures for the quarter and 9 months of the previous year are strictly not comparable."


After becoming the most influential stocks in the BSE Sensex on 17 January, Reliance Industries surged over 1 per cent on 18 January to hit a fresh 19-month high on expectations of healthy improvement in refining margins in its quarterly result.


"Refining is doing sufficiently well but ... clarity is still required on where the next round of revenue growth will come from," said Rikesh Parikh, vice president for equities at Mumbai brokerage Motilal Oswal Securities Ltd.


Reliance, India's biggest company by market value, has been under pressure from investors on account of its slowing energy business and a drive into consumer-focused sectors such as telecoms, retail and financial services, in which it is yet to turn a profit.


The results were released after the close of trade in India. Shares in the Mumbai-based conglomerate, valued at $52.6 billion, closed up 1.2 percent ahead of the results.


The stock rose by a fifth in 2012, but lagged a 26 percent increase in the main stock index


De-notification of 40% of RIL's Gujarat SEZ Approved
Reliance Industries also won government approval to de-notify over 40 per cent of its Special Economic Zone in Gujarat as it plans Rs 45,000 crore projects in that area to cater to domestic market.


An official said RIL's proposal was approved at the meeting of Board of Approvals (BoA) SEZ subject to the company obtaining a no-objection certificate (NoC) from the state government for the denotification.


"The BoA today approved the proposal but they have to take an NoC from the state government and the company also have to refund the tax benefits it may have availed for operating units in the only-for-export zone," he said.


The decision was taken by the Board of Approval for SEZ, which is headed by commerce secretary S R Rao.


RIL's multi-product SEZ is spread over 1,764.14 hectares.


The company wants partial de-notification of an area of 728.43 hectares, leaving 1,035.72 hectares of plan for the multi-product SEZ.


Sources said that in the de-notified area RIL plans to invest Rs 45,000 crore in new projects that will cater to domestic demand.


The developer had applied for partial de-notification so as to implement a number of new projects in the domestic tariff area (DTA) in Jamnagar near the SEZ. The proposed projects will mainly cater to the significant existing domestic demand.


RIL had stated in the proposal that it plans to invest Rs 45,000 crore in projects in the de-notified area.


SEZ houses 580,000 barrels per day or 29 million tons a year oil refinery that exports fuel to far off countries like Venezuela and Mexico, besides the US and Europe. An adjacent 33 million tons older unit cater to the domestic market.


Billionaire Mukesh Ambani-led firm is investing over $12 billion in its core refining and petrochemical industries as output from its eastern offshore KG-D6 fields dips to an all-time low of around 22 million standard cubic meters a day.


RIL is investing $8 billion, the most since it completed a second oil refinery in 2008, in expansion of its petrochemical business to meet rising demand of plastics and polyester.


Also, it is setting up a $4 billion petroleum coke gasification project that will produce synthetic natural gas that will replace expensive LNG as fuel.