Mukesh Ambani led, Reliance Industries (RIL) — India’s largest company by turnover and exports — is also set to become the country’s single-largest profitable company in FY10, thanks to its second refinery at Jamnagar and KG basin gas, when it publishes its results on Friday. On a consolidated basis, however, the ONGC Group, which includes ONGC and its subsidiaries Mangalore Refinery and ONGC Videsh, is likely to retain its leadership.
RIL, which reported a net profit of Rs 1,1526 crore for the first nine months of FY10 — around Rs 1,465 crore lower than ONGC’s — is expected to surpass the state-owned oil major’s last quarter standalone profits by over Rs 1,500 crore, according to various analyst estimates. Both companies report their quarterly numbers on a standalone basis while consolidating the numbers of subsidiaries in their annual results. ONGC Group’s consolidated net profit for FY10 is likely to remain above Rs 20,000 crore as in the previous two years.
The refining as well as E&P businesses would be the key drivers of profit growth, said Deepak Pareek, an analyst with Angel Broking. “RIL is likely to report strong performance during the quarter, primarily on account of increase in gas production and better refining margins,” he mentioned. In the past, only in FY08 had RIL’s profits surpassed those of ONGC’s, on account of extraordinary income of Rs 4,733 crore on sale of Reliance Petroleum shares. Excluding the impact of this extraordinary income, profits from operations were below that of ONGC’s.
However, now, for the first time, RIL’s profits from normal business activities, that are considered sustainable in future, are set to cross Rs 16,700 crore on a standalone basis for FY10 — the largest for any listed Indian company. ONGC, which was the single-largest profit-making company so far, is expected to close FY10 with a net profit of around Rs 16,200 crore.
In the current year, RIL’s subsidiary raised over Rs 9,300 crore through sale of treasury shares, which will add to its consolidated numbers. Although extraordinary, these profits could take RIL’s consolidated profit to a historical high hitherto unseen in Corporate India.
RIL, which is also India’s largest company by market capitalisation with a 13.2% weightage in the Sensex, witnessed a strong 46% increase in volumes in the first nine months of FY10, as its second refinery gradually reached full capacity. Higher average crude oil price — at around $78 per barrel during the March 2010 quarter as against $45 in the year ago period — is also set to boost revenues.
India’s leading listed conglomerate, controlled by billionaire Mukesh Ambani, has been scouting for acquisitions overseas, and progress on that front will determine its outlook. Reliance, valued at $78 billion, recently said it would pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the United States with Atlas Energy.
The deal followed two failed attempts to buy overseas firms as Reliance looks to expand its presence outside India, break into new markets and broaden its businesses, which include refining, oil and gas exploration and petrochemicals.
“The company has already invested in its own projects such as its gas fields in India and is going to generate a lot of cash flow,” said Deepak Pareek, an oil and gas analyst at Mumbai-based Angel Broking.
“A lot of that cash has to be pumped into overseas growth opportunities and that’s exactly what it’s done with Atlas.” Bankers say more overseas deals could be in the offing. The outcome of a long-running gas dispute with Reliance Natural, led by Mukesh’s younger brother Anil, will also have a bearing on the company’s outlook.
Reliance is unable to hit peak gas production of 80 million standard cubic metres a day (mmscmd) at its D6 block in the vast Krishna Godavari basin in the Bay of Bengal due to customers not buying allocated volumes, and a lack of pipelines. But analysts say current production of 63-64 mmscmd is still enough to boost results.
Reliance began pumping gas from the block in April last year. Analysts estimate gross refining margins (GRMs), a key measure of profitability, will have dropped about 16 per cent year-on-year in the March quarter to $8.30 a barrel, tracking a decline in Asia’s benchmark Dubai crack margin.
Reliance GRMs nearly halved to $5.90 a barrel in the December quarter. The company’s results will be helped by its acquisition last year of unit Reliance Petroleum. State-run explorer Oil and Natural Gas Corp is expected to post higher earnings on firmer oil prices, but subsidy payouts the group is required to make to state retailers will keep results muted.
A lack of clarity about the government’s subsidy rules means analysts estimates for ONGC are often disparate. “What you’d want to bet on is a company’s business or its management decisions,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. “But here you are betting on whether a government policy will change or not, which just can’t be figured out.” Energy major Reliance Industries should post a second straight increase in quarterly profit, lifted by higher gas output from fields off India’s east coast and a nascent recovery in refining margins.
India’s leading listed conglomerate, controlled by billionaire Mukesh Ambani, has been scouting for acquisitions overseas, and progress on that front will determine its outlook. Reliance, valued at $78 billion, recently said it would pay $1.7 billion to form a joint venture at one of the most promising natural gas deposit regions in the United States with Atlas Energy.
The deal followed two failed attempts to buy overseas firms as Reliance looks to expand its presence outside India, break into new markets and broaden its businesses, which include refining, oil and gas exploration and petrochemicals.
“The company has already invested in its own projects such as its gas fields in India and is going to generate a lot of cash flow,” said Deepak Pareek, an oil and gas analyst at Mumbai-based Angel Broking.
“A lot of that cash has to be pumped into overseas growth opportunities and that’s exactly what it’s done with Atlas.” Bankers say more overseas deals could be in the offing. The outcome of a long-running gas dispute with Reliance Natural, led by Mukesh’s younger brother Anil, will also have a bearing on the company’s outlook.
Reliance is unable to hit peak gas production of 80 million standard cubic metres a day (mmscmd) at its D6 block in the vast Krishna Godavari basin in the Bay of Bengal due to customers not buying allocated volumes, and a lack of pipelines. But analysts say current production of 63-64 mmscmd is still enough to boost results.
Reliance began pumping gas from the block in April last year. Analysts estimate gross refining margins (GRMs), a key measure of profitability, will have dropped about 16 per cent year-on-year in the March quarter to $8.30 a barrel, tracking a decline in Asia’s benchmark Dubai crack margin.
Reliance GRMs nearly halved to $5.90 a barrel in the December quarter. The company’s results will be helped by its acquisition last year of unit Reliance Petroleum. State-run explorer Oil and Natural Gas Corp is expected to post higher earnings on firmer oil prices, but subsidy payouts the group is required to make to state retailers will keep results muted.
A lack of clarity about the government’s subsidy rules means analysts estimates for ONGC are often disparate. “What you’d want to bet on is a company’s business or its management decisions,” said Rakesh Rawal, head of private wealth management at Anand Rathi Financial Services. “But here you are betting on whether a government policy will change or not, which just can’t be figured out.”
State-owned Oil and Natural Gas Corp (ONGC) may have won a large oil block in Venezuela but the Petroleum Ministry wants Reliance Industries to join the project to give stability to the venture.
ONGC Videsh Ltd, the overseas investment arm of the state-run explorer, and Reliance had in 2008 teamed up to bid for the Venezuela’s Carabobo field auction but last year the Mukesh Ambani-run firm walked out sighting delays in the bid round. OVL subsequently roped in Spain’s Repsol YPF and Malaysian state Petronas to win Carabobo-1 heavy oilfield.
But since the project involves investments that may over the life of the project run into USD 40 billion, the Oil Ministry wants Reliance back into the project, sources in know of the development said.
Sources said fillers at very high level were sent to Reliance but it has so far remained non-committal on taking the state.
Reliance has, however, agreed to bail the state-run firms out agreeing to buy over one-fifth of the 400,000-480,000 barrels per day of oil production envisaged from the project.
OVL, Repsol and Petronas all have an 11 per cent stake each in the project, while Indian Oil Corp (IOC) and Oil India Ltd (OIL) have 3.5 per cent each. The remaining 60 per cent is held by Venezuela’s state Petroleos de Venezuela (PdV).
As per the bid conditions, the foreign firms, who were offered a maximum of 40 per cent stake in the project, had to commit to offtake the entire production.
Sources said of the planned output, Repsol had indicated it can take 165,000 barrels per day while Petronas said it could take 100,000 bpd. The remaining 220,000 bpd was split equally between OVL and OIL.
OVL’s share of 110,000 bpd would go to ONGC’s subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL), while Reliance agreed to take OIL’s share for at least 10 years from the start-up in 2016-17.
India’s Reliance Industries owned by Mukesh Ambani & Oil & Natural Gas Corp (ONGC) have sold a total 85,000-90,000 tonnes of naphtha at stronger premiums, supported by tight supplies on a lack of arbitrage cargoes, traders said on Monday.
Privately run Reliance Industries sold a 50,000-55,000-tonne parcel for late March loading to Vitol at a premium of around $27.00 a tonne to Middle East quotes, FOB.
This was also higher than the 75,000 tonnes slated for March 18-22 loading from Sikka sold to an undisclosed trader at a premium around mid-$20.00s a tonne level.
Overall supplies have been tighter due to stronger demand against a lack of Western barrels streaming in.
