Reliance Industries reported a nearly flat profit of Rs 5,511 crore on falling gas production and refinery margins for the December quarter but beat analysts estimates as earnings from investments and lower finance costs compensated for a drop in operating income. However, the oil-to-retail conglomerate saw its revenues rise 10.5% to Rs 106,383 crore due to higher prices of its products and a marginal surge in volume.

The owner of the world’s biggest oil refining complex saw its refinery margins (profits from every barrel of crude processed) dip to $7.6 a barrel in the December quarter from $9.6 in the year-ago period, leading to a 13% fall in its refining and marketing EBIT to Rs 3,141 crore. The revenues from refining and marketing, which contributes almost 77% of its total turnover, grew 10% to Rs 95,432 crore. RIL CFO Alok Agarwal expects refining margin to recover this quarter. Income from avenues other than its core business rose 32.5% to Rs 2,305 crore during the quarter from a year ago.

RIL chairman Mukesh Ambani said, “Reliance’s robust refining configuration enabled it to deliver stable refining profits in 3Q FY14, against the backdrop of declining regional benchmark margins. Even as we invest to further strengthen our energy businesses, this quarter demonstrates the outstanding quality of our refining and petrochemical business resources and their ability to deliver creditable performance in a period marked by cyclicality and uncertainties.”

RIL’s revenues from its oil and gas business fell 10% to Rs 1,733 crore while its EBIT fell 8.5% to Rs 540 crore on falling gas production from its D-6 block in the KG basin.

The petrochemicals business saw 15% growth in revenues to Rs 25,280 crore and 10 % increase in EBIT to Rs 2,124 crore, because higher prices offset decrease in volumes. The EBIT for petrochemicals fell 15% compared to immediate preceding quarter due to falling demand of petrochemicals products, the company said in a statement.

RIL, with ratings of BBB+ by S&P, is the only Asian energy firms to be rated two notches above the sovereign ratings. It saw its debt grow by 12% to Rs 81,330. But the debt is backed by cash and cash equivalents of Rs 88,705 crore, making it a debt free company on net basis.

Investment adviser S P Tulsian said, “Upstream has really given a big surprise. I am unable to understand Rs 356 crore for Q2 and Rs 540 crore for this quarter. Petrochemicals is a big disappointment. If you really see the kind of fall which we have been seeing in some of the petchem products like PTA, MEG, there has been a drop, but this kind of margin shrinkage was not expected. That means we have seen a margin shrinkage of more or less about 160-170 basis points on a Q-o-Q basis.”

RIL’s overseas investments in the shale gas business and retail business has started paying off. The company reported a growth of 29% in revenues to $221 million from shale gas operations in US, where it has invested $6.4 billion so far. Similarly, Reliance Retail post its first pre-tax profit in the quarter. The company, which has already broken even, and reported a profit (before depreciation and income tax) of Rs 106 crore.

In view of the consumer sentiment, Reliance Retail had discontinued its non-vegetarian food retail format ‘Delight’ during the quarter, the company said.

RIL shares on BSE dropped 0.7% to Rs 885 in a weak Mumbai market on Friday.