Reliance Industries Speculating 5% Rise for Refining Margins

Published Date : Apr 16, 2015

Reliance Industries Limited (RIL), the oil and gas company conglomerate is anticipating a 5% surge in profit margins for the gross refining margins (GRM) in the fourth quarter of the last financial year. This is speculated for the company to post its highest ever profits for the refinery division.

GRM is calculated as the difference in the price of crude oil and the products that are obtained from refining the crude oil, the single most important indicator of profitability for a refining company.

The Mukesh Ambani led group has operations that are spread across petrochemicals, retail, oil and gas production, and petroleum refining and marketing. The refinery arm contributes more than 50% to the operational profit, while petrochemicals make for 30% of the operating profit.

According to a leading market research company, RIL is expected to have a standalone profit of Rs.5, 931.5 crore for the March quarter and report net sales worth Rs.64, 455.1 crore. For the same period last year, the company reported net profit worth Rs.5, 631 crore and sales worth Rs.95, 193 crore.

As per analysts, the company is speculating for higher profits owing to higher GRMs, though net sales are anticipated to drop. This is accounted to be subdued crude and product prices in the petrochemical and refining segment for the fourth quarter.

Also, as per analysts RIL earnings are anticipated to be 15% Q-o-Q in the sequence driven mainly by better performance in the refining sector. However, earnings from petrochemicals sector are anticipated to be muted due to cyclical lower prices.