Reliance earnings dragged down by chemical costs

New Delhi: Reliance Industries Ltd, India's biggest company by market value, reported profit that missed analysts' estimates for the first time in nine quarters after earning less from making chemicals.

Net income rose 24 per cent to Rs39.1 billion ($979 million) in the three months to March 31 from Rs31.6 billion a year earlier, the Mumbai-based energy and petrochemicals group said in a statement to the Bombay Stock Exchange on Monday. That missed the mean estimate of 23 analysts surveyed by Bloom-berg News for Rs40.8 billion profit.

Reliance shares fell for the first time in 15 quarters in the period as record oil prices raised the cost of making petrochemicals such as ethylene, used in plastics. Earnings growth may accelerate after billionaire Chairman Mukesh Ambani completes the world's largest refinery complex and starts output at India's biggest gas field that may yield more of the fuel than the Gulf of Mexico, according to Macquarie Bank estimates.

Cheaper crude

"The upside will come in from their upstream and their new refining capacity," said Mahesh Patil, who oversees $800 million in stocks as fund manager at Birla Sun Life Asset Management in Mumbai. By this time next year, oil and gas will contribute significantly to revenue, he said.

Reliance will complete the refinery this year in Gujarat, western India, to process oil into gasoline, diesel and naphtha for export to the US, Europe and the Middle East. Ambani earns more from each barrel of oil than overseas refiners by processing cheaper, lower grades of crude at a plant two days away by ship from Middle East oilfields.

Birla acquired 53,000 Reliance shares in the three months ended March 31, raising its holding to about 830,000, according to data compiled by Bloomberg.

Reliance's 21 per cent decline in the quarter mirrored the fall in India's benchmark Sensitive Index as concerns about a global recession caused the worst start to the year in Indian equities since at least 1979.

Profits from processing naphtha into ethylene have slumped about 69 per cent for Asian producers since last year, according to consulting firm Chemical Market Associates Inc.