India's largest private sector company, Reliance Industries (RIL) on Thursday reported 14% rise in its standalone net profit to Rs 5,376 crore in the quarter ended March 31, 2011.

The results were below analysts' estimates as flat production from its gas blocks and lower than expected refining margins weighed on results.

The company said it held cash and equivalents worth USD 9.5 billion and had debt of USD 15.1 billion as at end-March.

Reliance, which operates the world's biggest refining complex in western India, saw gross refining margins in its fourth quarter inch higher to USD 9.20 per barrel, up from USD 7.50 per barrel a year earlier and USD 9 in the previous quarter.

Deven Choksey, managing director of KR Choksey Securities said, "We were expecting the GRM spread to remain at around USD 3 plus levels. One will have to examine the reasons for that."

A disappointed SP Tulsian said he was expecting profit after tax to come in at Rs 5,680 crore. "I was expecting GRMs at USD 10.2 a barrel because there was been talk of strong GRM and if you take the Singapore benchmark, it is just close to about USD 2 higher or may be about USD 1.8," the market veteren said.   

Traditionally, he said, the company has been always enjoying USD 3 plus over the Singapore benchmark. "If they have a differential or may be the extra earnings of just less than USD 2 per barrel is that's also quite disappointing," he said.

Though he shared Tulsian's disappointment on the number, Sonam Udasi, head of Research at IDBI Capital is surprised by the robust topline performance. "Our GRM expectation was about USD 9.8 a barrel," he said 

On the EPS front Udasi said, "Our own number right now for Reliance is about Rs 67.30 for FY12. We will probably take a call on where this number is headed post the analyst meet."

He said the focus will now be on capex guideline and how it plans to use its surplus cash. "For us, the real concern is actually the declining ROE's where that cash is being deployed rather than what has happened during the quarter. The underlying concern is what is really happening on the cash utilization and on the gas output front. Our assumption continues to be at 51 mmscmd. If we see an up move or guidance in this meeting today, then that could change our outlook on the stock.  However, right now, we will stay with what we have currently," he said.

The company had to shut down its FCCU for six weeks for maintenance. The unit converts heavy low-value products into lighter, more valuable ones. Prayesh Jain, analyst at IIFL India said the underperformance could be due this event. "I think next quarter onwards things should stabilize," he said.

How will the stock react?

Tulsian doesn't expect RIL's Q4 performance to go down well with the market. He said the profit was anticipated closer to Rs 5,900 crore. "Now, this will definitely get extrapolated for FY12 where you have more concerns expected. If you have the petchem margin stagnant or maybe the GRM not keeping pace, especially in double-digits, an expected drop in gas production, which we have been hearing practically for last one month or so, is going to keep the profit projections for the FY12 at quite subdued level."

"I don't think that EPS estimate can really go beyond Rs 68 for FY12 taking all these figures into consideration. So, definitely this is going to disappoint the market," he said.