Cheap Crude Helps RIL Beat Estimates

Net profit for the March quarter rose to ₹21,327 crore from ₹18,021 crore in the year earlier. That beat quarterly profit estimates of ₹16,442 crore, according to a Bloomberg survey of analysts. Revenue rose 3.8% to ₹2.2 trillion.

Reliance Industries’ earnings were primarily boosted by its oil-to-chemical (O2C) business, which reported a sharp increase in profitability as India sourced cheaper Russian crude. The company’s retail and telecom businesses continued to deliver steady performances.

The O2C business reported earnings before interest, tax, depreciation and amortization (Ebitda) of ₹16,293 crore in the fiscal fourth quarter, marking a 14.4% increase from a year earlier. The company attributed the increase in Ebitda margin of 12.7%, up by 290 basis points from a year earlier, to the strength in transportation fuel cracks, optimized feedstock cost, and advantageous ethane cracking economics.

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Analysts had anticipated an improvement in Reliance Industries’ refining segment performance due to a crude sourcing advantage as India bought cheaper Russian crude. Reliance said strong growth in demand for jet fuel/kerosene and gasoline offset the moderation in diesel demand. In addition, the decline in the windfall tax helped boost profits. Although the company paid a special additional excise duty (SAED) of ₹711 crore on transportation fuels during the March quarter, it was significantly lower than the ₹1,898 crore paid in the preceding three months.

The revenue of the refining segment fell 11.8% to ₹128,633 crore from a year earlier, mainly due to lower crude prices, with dated Brent averaging $81.3 per barrel in the March quarter, down by $20.1 a barrel year-on-year and $7.4 a barrel sequentially.

“O2C segment posted its highest-ever operating profit despite global uncertainties and disruptions in commodity trade flows. Our oil and gas segment also delivered very strong growth and is now poised to contribute nearly 30% of India’s domestic gas production," said Mukesh Ambani, chairman and managing director of Reliance Industries.

The oil and gas exploration and production (E&P) segment also supported the overall performance. Quarterly revenue more than doubled to ₹4,556 crore from a year earlier, mainly on account of higher price realization and a 13% increase in KGD6 gas production. Ebitda also more than doubled to ₹3,801 crore from a year earlier.

Among consumer-facing businesses, the retail business reported good growth, buoyed by new store additions and brand expansions. Revenue rose 19% to ₹69,267 crore from the same quarter a year earlier, driven by growth in grocery, consumer electronics, fashion, and lifestyle. Ebitda surged 33% to ₹4,914 crore. The company added 966 new stores, covering a total area of 6 million sq. ft during the quarter. Footfall in its various formats reached a new high of 219 million. The business expanded its warehouse space by more than 1.7 million sq. ft, enhancing its supply chain capabilities. The digital commerce and new commerce businesses continued to grow and accounted for 17% of revenues, the company said.

Telecom unit Reliance Jio reported a net profit of ₹4,716 crore for the quarter ended March, 13% higher than ₹4,173 crore in the same quarter last financial year.

Average revenue per user (Arpu), a key metric of profitability for a telecom service provider, stood at ₹178.8, up 6.7% from ₹167.6 the year before and ₹178.2 in the quarter ended December due to the impact of tariff hikes, better subscriber mix and data add-ons within select customer cohorts.

“In the cities where we have deployed 5G, we are already seeing that there is a great increase in consumption, as high as three-four times even from a very high consumption base that we have with 4G and even without any change in tariffs. This means that we can anticipate Arpu growth just driven by consumption alone," said Kiran Thomas, director of Jio Platforms on Friday, during a presentation showcasing the carrier’s results for the quarter ended March.

India’s largest telecom services provider plans to launch Air Fiber, or its fixed wireless access service, which can offer broadband-like speeds through wireless connectivity, sometime this year and will be pitched to customers already using its Jio Fiber plans that will be expanded to markets across the country in the coming months.

“You can literally offer that service in a matter of hours. We are looking to launch this as soon as we hit critical mass with our 5G rollout," Thomas said. He added that the carrier was targeting 100 million homes through Jio Fiber and Air Fiber services over the next two to three years.