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Reliance drops bottomline bombshell

Mumbai, Jan. 10: Corporate India’s Big Daddy, Reliance Industries Ltd (RIL) ' which is on the cusp of a demerger 'today reported one of its worst quarter results. For the first time in 10 quarters, the refining and petrochemicals giant saw its net profit in the third quarter of the fiscal ended December 31, 2005 plunge by over 15 per cent to Rs 1,776 crore from Rs 2,091 crore in the year-ago period.

The slide in its bottomline was led by its refining business as margins got badly crimped during the quarter. As a result, refining business profits plunged 45.75 per cent to Rs 856 crore from Rs 1,578 crore in the same period last year. On a sequential basis too, refining profits fell 41.12 per cent from Rs 1,532 crore in the second quarter of 2005.

The results were announced long after market hours, but punters who were expecting profits to tumble by 10 per cent, sent the stock skidding to Rs 893.55 at close on the BSE, down Rs 16.15 (or 1.77 per cent). The stock closed at Rs 894.10 on the NSE.

RIL, however, hinted that a partial shutdown of its refinery for planned maintenance during October and November was responsible for the disappointing performance. The shutdown, it said, resulted in only 6.70 million tonnes of crude being processed during the period as compared with 7.95 million tonnes earlier.

Reliance posted a marginal rise in its turnover for the quarter. It stood at Rs 19,899 crore compared with Rs 19,714 crore, a growth of only 0.93 per cent. While its net turnover grew to Rs 18,168 crore (Rs 17.768 crore), other income plummeted to Rs 180 crore against Rs 331 crore last year.

For the nine month period, turnover stood at Rs 62,676 crore against Rs 53,324 crore, a rise of 18 per cent over the corresponding period last year. Net profit increased 24 per cent when it grew to Rs 6567 crore against Rs 5280 crore. RIL said the increase in sales reflected the increase in product selling price of 20 per cent and a decrease in sales volume of 2 per cent.

Analysts were disappointed by the RIL numbers and said the scrip could take a hit when trading resumes on the bourses on Thursday.

“The numbers are below market expectations. It was like a bolt from the blue. We were expecting its net profits to come down by 9-10 per cent. Therefore, on the face of it, the 15 per cent fall is certainly negative,” said V.K. Sharma, head of research at Anagram.

Sharma, however, added that a positive aspect emerging from the results, was the company’s revelation that during the period, oil discovery notification for two wells drilled in KG-III 6 block was submitted to DGH. “If we take this information together with the results, then it may not seem bad over the long term,” he added.

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