Energy conglomerate Reliance Industries reported a 14 percent fall in October-December net profit, its first quarterly profit drop in more than two years, as refining margins fell sharply.

Reliance also said its board approved spending up to 104.4 billion rupees to buy back shares, as it sought to bolster its underperforming stock.

Controlled by Mukesh Ambani, the world's ninth richest person according to Forbes, Reliance's market value tumbled 35 percent in 2011, mainly over growth worries as output from its offshore gas fields slowed sharply from the previous year.

The stock has underperformed the main Mumbai market, which fell nearly 25 percent in the same period.

Reliance, India's biggest company by market value, said net profit fell to 44.4 billion rupees for the fiscal third quarter ended December from 51.36 billion a year earlier. Net sales rose 42 percent to 851.35 billion rupees.

A Reuters poll of brokerages had forecast net profit of 48.1 billion rupees on net sales of 819.9 billion.

It reported gross refining margins of $6.8 a barrel for the quarter, compared with $9 a barrel a year earlier, and sharply lower from the $10.1 per barrel it reported in the September quarter.

"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," Reliance Chairman Mukesh Ambani said in a statement.

The company operates the world's biggest refining complex in western India, which can handle less costly high-sulfur crude oil, giving it among the best refining margins in the industry. The refining segment accounts for nearly 80 percent of Reliance's revenues.

The margins, a key measure of profitability, were impacted by higher crude prices and narrowing spread between light and heavy crude prices.

Reliance's oil and gas exploration business posted a 32 percent decline in revenue, mainly on account of lower production at its main D6 offshore block.

The company's growth outlook has been marred by falling gas output from its huge gas fields off India's east coast. The company is producing around 40 mscmd (million standard cubic metres per day) of gas, sharply lower than the 60 mscmd it was producing a year earlier.

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