MUMBAI Energy conglomerate Reliance Industries Ltd (RELI.NS) reported its second consecutive quarterly drop in profit, hurt by weak refining margins and declining gas output from its offshore fields.
Controlled by billionaire Mukesh Ambani, Asia's second-richest person according to Forbes, India's biggest company by market value saw its stock price fall by a third in 2011 on worries about its gas output.
The company has embarked on a diversification spree, venturing recently into the media business and expanding its supermarkets business.
Reliance, which operates the world's biggest refining complex, in Jamnagar, plans to make fresh investments in its core business while continuing to grow its retail footprint and work towards rolling out wireless data services, Ambani said in a statement on Friday.
The company tied up with BP (BP.L) last year to increase output from some of its oil and gas blocks and is awaiting government approval for investment plans.
"Somewhere, somehow, Reliance has lost that Midas touch," said Jagannadham Thunuguntla, strategist at brokerage SMC Global Securities in New Delhi.
"It is high time they gave clear indication to the analyst, investor community on how they are going to deploy that cash. Otherwise it is going to be a huge overhang," he said.
The company held cash of $13.8 billion at March-end.
Gas output from Reliance's fields off India's east coast may decline to an average 27.6 million standard cubic meters a day (mscmd) in 2012/13, about a third of what was initially estimated, a government source said in February.
Production of natural gas from the KG D6 block was 551.31 billion cubic feet in the fiscal year to March 31, down 23.5 percent from a year earlier, the company said in a statement.
The company, which has a market value of $46 billion, said net profit fell 21.2 percent to 42.36 billion rupees for the fiscal fourth quarter ended March from 53.76 billion rupees a year earlier.
Net sales rose 16.7 percent to 878.33 billion rupees.
Reliance was expected to post net profit of 43.3 billion rupees on net sales of 866.5 billion, according to Thomson Reuters I/B/E/S.
After profit fell for the first time in more than two years in the December quarter, Reliance moved to bolster its shares by announcing a share buyback of up to $2.1 billion, the biggest ever in India.
Still, the stock has underperformed the main Mumbai market over the past 15 months.
The shares have risen 5.5 percent so far this year, lagging a 12.4 percent rise in the main stock index, in which they have the second heaviest weight. Ahead of the results, the stock closed down 1.5 percent.
Reliance reported gross refining margins of $7.60 per barrel for the March quarter, compared with $9.20 a year earlier, but more than the $6.80 it reported in the December quarter.
Its refinery at Jamnagar in Gujarat can handle less costly high-sulphur crude oil, giving it among the best refining margins in the industry. Refining accounts for nearly 80 percent of Reliance's revenue.
The margins were squeezed by higher crude prices and a narrowing spread between light and heavy crude prices.
Reliance's petrochemicals business posted a nearly 18 p ercent rise in revenue on higher domestic demand.
Its oil and gas exploration business posted a 36.5 percent fall in revenue, mainly due lower production at its main KG-D6 block, Reliance said.
Reliance, which has been looking to diversify, in January invested in India's TV18 media group and is widely expected to launch broadband services using fourth-generation (4G) technology later this year, after paying $2.5 billion for countrywide spectrum in a 2010 state auction.
It has also been speeding up the opening of supermarkets across the country.
(Reporting by Sumeet Chatterjee and Devidutta Tripathy; Editing by Aradhana Aravindan, Tony Munroe)