RIL net profit drops 13.6pc; Announces $2 billion buyback of shares

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Reliance Industries' quarterly net fell 13.6% as margins for the world's largest refining complex at Jamnagar shrank in a sluggish global economy, but the company promised to return cash to shareholders by pledging a $2-billion buyback of up to 3.7% of its shares at a 10% premium over current price.

Net profit dropped despite a 40% jump in turnover as refining margins, or the money it makes from converting each barrel of crude into fuel, fell 24% to $6.8 from $9 a year ago. Globally, margins have fallen after two strong quarters, particularly for gasoline and naphtha. Because of lower margins, the refining and marketing segment's earnings before interest and taxes fell 30% although revenues rose 46%.

The contraction in refining margins was mirrored in the company's core profit from operations, before accounting for other income, interest and tax, which also declined 24% to 4,715 crore compared with the same quarter last year. Net profit, at 4,440 crore, did not fall as steeply because it was propped up by the sharp rise in 'other income', which more than doubled to 1,717 crore. Other income was 30% of pre-tax profit and exceeded the refining and marketing segment's EBIT of 1,685 crore.

"The global nature of our businesses and weakness in economic conditions resulted in reduced earnings in the quarter, particularly in our refining and petrochemicals businesses. Notwithstanding these challenges, Reliance has delivered reasonably robust results with high operating leverage," CMD Mukesh Ambani said in a statement.

The company's cash pile swelled to 74,539 crore while its debt amounted to 74,503 crore, making it practically debt-free. Its board approved the buyback of up to 12 crore of its 327.46 crore equity shares at a price not exceeding 870 up to an aggregate amount not exceeding 10,440 crore from the open market.
This is 9.7% more than Friday's closing price of 793.35.

Government approved commerciality for onshore discovery in GS-O1 and the optimised FDP for 4 satellite discoveries in KG-D6, it added.