Margin fall, gas row cloud Reliance Industries outlook

By Pratish Narayanan

MUMBAI (Reuters) - A sluggish global economy has slashed oil refining margins of India's Reliance Industries, leading to a fourth straight fall in profit and adding to concerns for investors already unnerved by a gas-pricing dispute.

Reliance Industries, controlled by billionaire Mukesh Ambani, is embroiled in a high-profile legal battle over a deal to sell gas to Reliance Natural Resources, led by Ambani's estranged younger brother Anil, at below the price set by the government.

A ruling by India's top court, which is currently hearing the dispute, will determine whether Reliance Industries stands to make or lose billions of dollars though sales of gas from its find in the Krishna Godavari (KG) basin off India's east coast.

"Till the top court gives its final judgement, investors will be faced with uncertainty," said A.N. Sridhar, fund manager at Sahara Mutual Fund, which owns Reliance stock.

Jitters surrounding the case have weighed on the company's shares, which are down 15 percent since mid-June when it received an unfavourable ruling from a lower court. The main index has risen more than 5 percent in that time.

Results at Reliance Industries, which has interests in petrochemicals, refining, oil and gas exploration, and retail, have been dented by shrinking refining margins and lower demand for petrochemicals in the wake of the global economic downturn.

Reliance's refining margins fell to $6 a barrel in its fiscal second quarter to the end of September from $13.4 a barrel a year earlier. Analysts had expected $6.6 per barrel.

India's most valuable listed company reported a fourth straight decline in quarterly profit, although it still met market estimates.