Reliance to spend $5 billion after strong refining margins lift Q1 profit
Mumbai: Reliance Industries Ltd said on Friday it would invest $5 billion across its refining and petrochemicals business by next March, after strong refining margins boosted its quarterly profit.
Controlled by India's richest man Mukesh Ambani, Reliance is India's second-largest company by market value and runs the world's largest refinery complex.
It beat forecasts with a near 12 percent jump in net profit for the quarter through June, its fiscal first quarter, from a year earlier to 63.18 billion rupees.
That topped analysts' estimate of 63.08 billion rupees, as the company said its refining margins reached a six-year high.
Reliance is investing heavily to add capacity and expects its gross refining margin, or the profit it makes from each barrel of crude oil refined, to increase after the expansion is completed in two years.
"It would be fair to say that about half of the value of the (benefit from) expansion should come in 2016/17," V. Srikanth, Reliance's joint chief financial officer, told reporters, referring to the fiscal year that will begin next April.
Reliance saw its gross refining margin rise to a six-year high of $10.40 in the June quarter, compared with $8.7 in the same period a year earlier.
The company, which derives most of its revenue from its core refining and petrochemicals businesses, has been expanding in recent years into consumer-facing businesses such as retail and telecoms to aid growth.
4g Launch
Its Reliance Jio unit, which is building India's largest 4G broadband network, will begin an "extensive" test launch in the next few weeks and will have access to about 75,000 mobile towers at the time of its commercial launch planned for December, Srikanth said.
Reliance re-entered the telecoms sector in 2010 but has yet to launch services, highlighting the challenges it faces with infrastructure and a new technology. It has already invested more than $15 billion in the telecoms business.
The company aims to offer affordable broadband services to millions in a country where only about a quarter of the billion-plus population currently has Internet access.
Reliance's retail arm will look at selling 4G-enabled devices under an inhouse brand "Reconnect", Anshuman Thakur, a senior vice president at the company, said.
Ahead of the results, shares in Reliance, ended 1.9 percent lower in Mumbai, where the broader market fell 0.8 percent. Reliance shares are up about 15 percent this year, outperforming a nearly 3 percent gain in the main index.
