Reliance Industries shares closed 2 per cent lower at Rs 869.50 on the BSE after the company results failed to enthuse most analysts.
Reliance Industries, in which foreign institutional investors increased their holding to 18.26 per cent in the quarter-ending December from 17.69 per cent same period last year, reported almost flat profit growth helped by a rise in revenue from its non-core business.
The net profit remained flat due to a drop in gross refining margins at its refineries and continued fall in production from its KG exploration blocks.
The result was announced after market hours on Friday.
Ambit Capital in a report said: “We believe the company will adopt a defensive strategy in its exploration and production business and lay greater emphasis on expanding its downstream business, which has a limited opportunity for value creation. We do not expect a strong recovery in downstream margins, given that global capacity additions are likely to outpace weak demand growth.”
Swarnendu Bhushan of Elara Capital, said: “We do not expect significant improvement in gas production from the currently producing fields. Approvals and monetisation of undeveloped discoveries will remain hostage to the resolution of arbitration and bank guarantees.”
China to impact Analysts also fear that weakness in the Chinese economy could put significant pressure on downstream margins.
Ambit Capital report also said: “We do not foresee RIL regaining its lost competitive advantage in the downstream business due to structural weakness in naphtha cracks and rising competition from the low-cost gas-based ethylene cracker capacity in the US and West Asia.”
However, Angel Broking, which recommended a ‘buy’ on Reliance Industries with one year price target of Rs 1,017, said:
“We expect production from the KG D6 block to increase gradually from FY15. Moreover, higher gas prices and the recent improvement in gross refining margins are likely to drive its earnings growth in FY15.