Jan. 23 (Bloomberg) -- Reliance Industries Ltd., India’s biggest company by market value, fell as much as 4.7 percent after profit dropped for the first time in more than two years as a global economic slowdown curbed fuel demand.
Shares declined to as low as 755.20 rupees, the biggest intraday drop since Nov. 23, and traded at 765.90 rupees as of 9:23 a.m. in Mumbai. The shares have increased 11.7 percent this year, compared with an 8.3 percent gain in the benchmark Sensitive Index.
Europe’s deepening debt crisis and slowing growth in China and India eroded fuel demand, while output from Reliance’s biggest natural gas field fell. Reliance shares slumped 35 percent last year, prompting the company to announce a $2 billion buyback, and earnings from processing crude may weaken further in 2012 as increased capacity in Asia pressures margins.
“Refining profit is not improving this quarter and that gives very little headroom for the stock to move up in the near term,” said Deven Choksey, managing director at Mumbai-based brokerage K.R. Choksey Shares & Securities Pvt. “Profit will continue to be under pressure till the second half of the year at least because of the weak economies around the world.”
Net income at Reliance, controlled by billionaire Mukesh Ambani, declined 14 percent to 44.4 billion rupees ($884 million), or 13.6 rupees a share, in the three months ended Dec. 31 from a year earlier, the Mumbai-based energy explorer and refiner said Jan. 20 after the stock market closed. That missed the 45.6 billion rupee median estimate of 29 analysts surveyed by Bloomberg.
The company’s board approved buying back 120 million shares at 870 rupees apiece, 9.8 percent higher than the closing price on Jan. 20, for a total of as much as 104.4 billion rupees, according to a separate statement.
Earnings from turning a barrel of crude oil into fuels fell to $6.8 in the quarter, the lowest in two years, from $9 a barrel a year earlier, according to the statement. The company earned $10.1 a barrel in the three months ended Sept. 30. Sales in the quarter climbed 42 percent to 851.4 billion rupees.
Reliance operates two adjacent plants at Jamnagar in India’s western state of Gujarat that together make up the world’s biggest refining complex. The plants can process 1.24 million barrels a day and can turn cheaper heavy grades of crude into high-value products.
--Editors: John Chacko, Indranil Ghosh
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