MUMBAI Reliance Industries (RELI.NS) will hold off from more investment in its main gas block until the government approves its development plans, the energy company said on Friday, after reporting a forecast-beating quarterly profit.
Reliance, India's second-most valuable company and controlled by the country's richest man Mukesh Ambani, gets most of its revenue from a sprawling energy business. It operates the world's biggest crude oil refinery in western India, and also has interests in areas including retail and telecommunications.
The company operates the KG D6 block off India's east coast, where gas output has fallen sharply since 2010. Reliance and partner BP Plc (BP.L) have attributed this to geological complexities, but the regulator believes the slump in production is on account of not drilling enough wells.
Investor focus has been firmly on the small but high potential oil and gas business, after the government last month gave conditional approval for the company to raise gas prices from April 1.
"This is just the first step that will enable us to meaningfully go ahead with investment," Chief Financial Officer Alok Agarwal said of the recent gas price hike approval at a news conference after quarterly results were released.
"A lot of development plans are still with the government," he said. "It's a much more conducive environment now but until approvals come investments will not change significantly."
Reliance posted an average gross refining margin of $7.6 per barrel for the three months to December, compared with $9.6 in the same period the year before. Analysts expect tight refining margins in the near term as demand growth lags likely refining capacity additions in the United States, China and Middle East.
PROFIT BEATS ESTIMATES
In a surprise move, Reliance's telecommunications business unit this week applied to bid in a mobile phone spectrum auction starting next month, heating up competition.
Voice telephony, which is the mainstay for Indian mobile phone carriers, will be a service Reliance aims to offer, along with its yet-to-start high-speed 4G broadband Internet venture, Agarwal said, declining to give further details.
Reliance's net profit at 55.11 billion rupeesrupees forfor its fiscal third quarter to December was little changed from a year earlier. However, it beat the 53.4 billion rupees estimated on average by 14 analysts, according to Thomson Reuters StarMine.
Revenue for the quarter rose 10.5 percent to 1.06 trillion rupees, Reliance said. Revenue from refining, which accounts for more than 80 percent of the total, rose 10 percent to 954.32 billion rupees. Retail business revenue was up 38 percent to 39.27 billion rupees.
Reliance held cash reserves of $14.4 billion at the end of December and was debt free on a net basis, it said.
Shares in Reliance, valued at more than $46 billion, eased 0.2 percent ahead of the earnings in a Mumbai market that closed 0.9 percent down. The stock gained 6.6 percent last year, almost in line with the broader market index .NSEI.
(Writing by Devidutta Tripathy; Editing by Mark Potter)
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