Mukesh Ambani controlled Reliance Industries (RIL) has recorded a 15.8 per cent rise in

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net profit to Rs 4,008 crore, beating analysts expectations, as higher operating profits from its oil and gas business and petrochemicals business more than compensated for the fall in profits from its refining business.

Earnings per share rose to Rs 12.3 for the quarter ending December 2009.

The first profit increase in five quarters was on the back of rising production from the Krishna Godavari basin D6 gas field also which saw the oil and gas business operating profits rise 144.53 per cent to Rs 1,477 crore overtaking operating profits from refining of crude oil for the first time in RIL’s history.

However, the growth in net profits in the quarter ended December 2009 was much lower than the 92.7 per cent rise in turnover to Rs 58,848 crore in the third quarter of financial year 2009-10. A year-on-year (yoy) 162 per cent rise in consumption of raw materials to Rs 42,619 crore crimped growth in profits before depreciation, interest and taxation to a 38.5 per cent yoy rise. A more than doubling of depreciation charges to Rs 2,795 crore and higher interest costs, all weighed on the growth in net profit.

Petrochem business operating profits have so far this fiscal year been the single largest contributor to profits of India’s biggest company by market value.

But Alok Agarwal, chief financial officer, RIL said this was not a representative year for the company with nine month petrochem business margins recorded at amongst the best in recent years.

“In 2010, we expect refining margins to improve further especially if the demand as forecast by the International Energy Agency is realised. This should also result in the difference between differentials of light-heavy crude oil expanding. In the petrochemicals business there is significant net capacity addition planned to come on stream in China and the Middle East in this year. However if the demand for polymers in India and China grows at the same 25 per cent as it did in 2009 then the situation will be OK,” Agarwal said.

The Reliance Petroleum refinery at Jamnagar too is now operating at 115 per cent capacity utilisation, the company said in a statement. Agarwal claims that RIL is the only major refining company that operated its refineries at 100 per cent capacity utilisation. It also saw comfortable demand for all the major polymers it produced, he added.

RIL aims to steadily ramp up gas production from its prolific D6 gas field from 60 million metric standard cubic metres per day (mmscmd) to 80 mmscmd. “So far around 43 per cent of our refined output is for the domestic market while the balance is exported. The decision on the mix between the two depends on where we get better profits and the capacity of the markets to absorb the output. We are today dealing with all the major oil companies of the world to sell our output in Asia, Europe and the USA,” Agarwal said.

“Gas is the primary driver for the profits and will continue to be. We can expect more positive surprises on the exploration and production side,” Maulik Patel, head of research at K.R. Choksey Shares & Securities told Bloomberg. Reliance earned $5.9 on every barrel of crude it turned to fuels in the quarter as compared Global refining margins of $1.49 a barrel.

“RIL reported gross refining margin (GRM) of $5.9 per barrel in Q3FY2010 above our and street expectation of $5.5 per barrel. The operating profit margin declined by 436 basis points yoy to 13.8 per cent in Q3FY2010 mainly on the back of decline in gross refining margins,” brokerage Sharekhan said. India’s largest petrochemicals company said its outstanding debt fell by Rs 3,896 crore in the nine months of this fiscal year to Rs 70,008 crore. The company also said that it had cash and cash equivalents of Rs 15,959 crore as of end December 2009.

“We are positioning ourselves for growth in 2010 and 2011 by creating a bigger financial base to look at bigger investments including capex. The treasury stock sales have increased our ability to go for growth globally. Our earnings are very highly geared to global economic growth and that in Asia,” Agarwal said.

Subsequent to series of new discoveries in the southern and deeper areas of the KG D6 block, an optimised development plan was submitted to the Directorate General of Hydrocarbons India in December 2009, RIL said in a press release. The company also said it has farmed out 30 per cent of its participating interest in Oman-Block 18 and 25 per cent in Oman-Block 41 to Oman Oil Company Exploration and Production subject to government approval. In India around 600 of its auto fuel retail outlets have now been made operational.

“In Reliance Retail where we are the largest food retailer in India we are making significant progress in improving efficiency. We are well on the path to make it profitable. Watch out for developments in this business in the near future,” Agarwal said.