Reliance Industries Beats Street For Seven Straight Quarters

Reliance Industries Ltd. (RIL) reported a 4.1 percent rise in standalone profit to Rs 8,022 crore in the October-December quarter, making it the seventh consecutive quarter for RIL to beat analysts’ bottom line estimates. The numbers were aided by a 33 percent jump in other income compared to the previous quarter.

The company also reported its highest third quarterly sequential revenue growth in four years. RIL’s revenue grew 3.5 percent to Rs 66,606 crore from Rs 59,493 crore in the previous quarter.

Earnings before interest, tax and depreciation and amortisation fell 4.3 percent to Rs 10,099 crore in the second quarter. EBITDA margins contracted by 120 basis points to 15.2 percent on a standalone basis. 11 analysts polled by Bloomberg, had pegged the figure at Rs 11,359 crore.

Gross Refining Margin

Gross refining margins for the third quarter stood at $10.8 per barrel against $10.1 per barrel in the previous quarter. The refiner’s premium over the benchmark Singapore complex margin contracted to $4.1 per barrel from $5.1 per barrel in the quarter before. The Singapore gross refining margins, which is the benchmark gross refining margin for major Asian refiners, averaged around $6.7 per barrel.

Petrochemicals Business

Revenue from the petrochemicals business increased 1.9 percent sequentially to Rs 22,854 crore. This was primarily due to increase in the volume of fiber intermediates and polyester products. Petrochemicals margins contracted to 14.4 percent.

Production of petrochemicals decreased to 6.2 million metric tonnes from 6.4 million metric tonnes in the previous quarter.

The company’s core petrochemical and refining businesses continued to generate profits unlike the oil and gas, which continued to be a drag on profits.

The refining segment accounts for over 65 percent of the profit and 70 percent of the revenue for the operator of the world’s biggest oil-refinery complex, with a capacity of 1.24 million barrels of oil per day, at Jamnagar in Gujarat.

Oil and Gas Business

The oil and gas segment saw weakness as revenue declined 8.4 percent to Rs 1,215 crore from Rs 1,327 crore in the same quarter of the previous year. The decline in revenue was led by lower upstream production in domestic blocks.

Reliance Industries' KG-D6 basin produced 0.26 million barrels of crude oil in the second quarter, declining 28 percent year-on-year. The production of natural gas too declined 29 percent year-on-year to 24.4 billion cubic feet. The fall in oil and gas production was mainly on account of natural decline in the fields.

The Panna-Mukta and Tapti fields produced 1.47 million barrels of crude oil, a reduction of 8 percent from the same period last year. Natural gas production fell 7 percent on a yearly basis to 15.6 billion cubic feet.

Telecom Business

The company’s latest venture, Reliance Jio Infocomm Ltd., has managed to enroll 7.2 crore subscribers as of December 31, 2016, and, according to the management, it is adding an average 6 lakh subscribers per day. The total debt on Reliance Jio Infocomm’s books now stands at Rs 49,000 crore, with translates to and deferred spectrum liability to the government of Rs 21,000 crore, according to the group’s Deputy CFO, V Srikanth, at a media briefing after the results were announced. This translates to more than 31 percent of the group’s total debt, versus 19 percent just nine months earlier, according to BloombergQuint’s calculations.

Points of interconnect (POI) with other telecom operators continues to be an issue, with the company accusing incumbent players of not providing enough POIs which has led to a sharp fall in the quality of service, said the company. “The current call failure rate is around 175 calls failing per every 1,000 calls from Jio to Bharti Airtel network. The QoS regulations mandate that no more than 5 calls out of every 1,000 can fail”, said RIL in a statement.

Retail Business

The organised retail business saw revenue grow by 7.5 percent on a quarterly basis to Rs 8,688 crore.

RIL said that demonetisation had led to “cautious buying” by customers for a short period.

Overall impact from demonetisation has been positive for core retail business with favourable long-term implications for modern trade, Reliance said in the media statement.

Citing a Nielsen report, the company said that its Reliance Fresh and Smart stores grew faster than modern trade post demonetisation, and that its share of trade went up to 27.8 percent after the cash ban as compared to 26.2 percent before the event.