Driven by record gross refining margins, India's largest firm by market capitalisation, Reliance Industries (RIL) is likely to post a 35% increase in Q4 net profit to Rs 3,850 crore. This profit is expected to be on revenues of Rs 36,441 crore, an increase of 33% over the corresponding period of the previous fiscal.
Profits are expected to be primarily driven by record gross refining margins (GRMs) of US$16 per barrel during the quarter, more than double of the benchmark Asian crack margin on Dubai crude, which averaged about US$7 a barrel. RIL reported a GRM of US$15.4 last quarter. The company is expected to continue to ride on the robust refining margins for the next couple of quarters as the highly complex configuration of the Jamnagar refinery allows it to process heavy and sour crude. However, RIL's petrochemicals business is likely to be affected with pressure on margins because of increase in naphtha cost and decrease in polymer prices.
Traditionally, refining and petrochemicals contributes close to 98% of RIL's revenues. With the commercial production of gas from KG basin in the second quarter, the situation is likely to reverse. RIL has decided to close down its petroleum retail business because of mounting losses. Its retail subsidiary, Reliance Retail (RRL), is expected to make marginal losses for the huge investments made in the first phase of its roll out.