Nearly 35% of RIL's Rs 7,113-crore net profit is from treasury gains

Reliance Industries' chairman & MD Mukesh Ambani (L) with wife & founder Reliance Foundation Nita Ambani (C) and Reliance Group chairman Anil Ambani (R) at a Civil Investiture Ceremony in New Delhi on March 28, 2016. Image Source: IANS

After consistently falling for some quarters, the share of other income in Reliance Industries' total net profit of Rs 7,113 crore in the June quarter has substantially jumped to 34.5% or Rs 2,378 crore.

On year-on-year basis, this was a massive 50.12% spike from Rs 1,584 crore the company reported in June 2015 quarter when its net profit stood at Rs 5,916 crore.

The same stood at Rs 1,953 crore in the March 2016 quarter on a total net profit of Rs 6,925 crore.

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When asked whether the company has been increasing its play in the treasury market or has it booked some profits from its massive investments, Reliance Industries Ltd (RIL) deputy chief financial officer V Srikanth told PTI that the numbers reflect the higher yields the market has been returning during the quarter.

While refusing to share the specifics of the company's investment in government bonds, Srikanth said RIL for long has been parking its surpluses, which stood at almost Rs 97,000 crore as of end June, in government bonds, mutual funds, fixed deposits and other fixed income instruments. And the same continued in the reporting quarter as well.

RIL, which is one of the biggest players in the treasury markets, was netting over 40% of its total net profit from treasury gains or other income, which started declining after the banking regulator began to frown upon corporates' large influence in the money and government debt markets.

Reliance, which has the highest cash balance, is also one of the highly indebted companies in the country. Its debt rose to Rs 1,86,692 crore as of June from Rs 1,80,388 crore as of March 2016 while the cash balance inched up marginally to Rs 90,812 crore from Rs 89,966 crore from March 2016.

Accordingly, the company's interest payout jumped to Rs 1,206 crore from Rs 915 crore a year ago and from Rs 842 crore from the March quarter.

About the forex components of the debt pile, Srikanth said over 90% of RIL bet is in US dollars while almost the entire Rs 47,000 crore debt of Reliance Jio is rupee-denominated.

RIL, which operates the world's largest oil refinery with a 63 million tonnes annual capacity, on Friday reported a hefty 18.1% jump in June quarter net profit at Rs 7,113 crore or Rs 24.1 per share on account of highest refining margin in the past eight years and robust petrochemical earnings.

Reliance has earned $11.5 on turning every barrel of crude into petroleum product. This was the highest gross refining margin it has earned in eight years, as against $10.8 in the March 2016 quarter and $10.4 in the June 2015 quarter.

This was the ninth consecutive quarter for which the company posted highest segment profit for refining and petrochemical business. But revenue fell 13.4% to Rs 71,451 crore, hurt by a sharp fall in prices of crude oil and petroleum products.

When asked about the capital expenditure (capex) plans for the fiscal, Srikanth said the June quarter spending was comparatively lower than the preceding quarter at around Rs 27,000 crore against Rs 32,000 crore in the March quarter.

For the full year, the company has earmarked $9 billion in capex. Out of this around $4 billion each will be spent on the ongoing RIL expansion and to roll out the Jio network. The rest will be on upstream and retail business, the deputy chief financial officer added.

More of the remaining $1 billion will be into retail as the company pushes its petrol retailing which has been merged with Reliance Retail since April, Srikanth said, adding the number of functioning fuel stations rose to 361 stations. He did not offer the sales volumes at the pumps.

Revenue from organised retail soared 46% to Rs 6,666 crore and EBIT by 21.2% to Rs 240 crore. Currently, Reliance Retail runs 3,383 stores across 697 cities with an area of over 13 million square feet.

It added 16 Reliance Trends stores during the quarter taking the store count to 287 stores and further consolidating the position as the largest fashion destination, while its consumer electronics vertical Reliance Digital and Digital Express Mini stores, operates 1,862 stores in over 650 cities.

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