Reliance Industries Q1 Results Preview: RIL's Profit Seen Falling As Covid Hurt Demand For Oil, Retail Units
Laborers sit outside a Reliance Industries construction site at the Bandra Kurla Complex in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Reliance Industries Q1 Results Preview: RIL's Profit Seen Falling As Covid Hurt Demand For Oil, Retail Units

Reliance Industries Ltd.’s first-quarter profit is expected to decline as lockdowns to curtail the deadlier second wave of Covid-19 infections hurt demand for its oil-to-chemicals and retail units.

Consolidated net profit of India’s biggest company by market value is expected to fall by more than 10%, both sequentially and over the year earlier, to Rs 11,889.8 crore in the quarter ended June, according to the average of analysts’ estimates compiled by Bloomberg.

  • Its consolidated revenue is likely to decline 2% quarter-on-quarter but jump 66% over the year-ago period.

  • Operating income is estimated to drop 11.8% sequentially but increase 10.3% year-on-year.

RIL is set to announce its first-quarter FY22 results on Friday.

Oil-To-Chemicals

India’s consumption of petroleum products fell 10.4% over the preceding quarter, with aviation turbine fuel witnessing the biggest drop of more than 30%, data released by the Petroleum Planning & Analysis Cell showed. Petrol and diesel demand contracted 13.2% and 10.5%, respectively, in the first quarter.

But the operating profit for RIL’s O2C segment is expected to rise sequentially on better refining and petrochemical margins.

RIL’s refining segment will improve on account of inventory gains and a recovery in gasoline and jet fuel spreads. The benchmark Singapore GRM rose 16.7% sequentially to $2.1 a barrel in the first quarter. Also, the Brent crude averaged at $69.1 a barrel in the reported period, up 13% over the preceding three months.

Petrol, diesel, and jet fuel spreads jumped 44%, 13%, and 36%, respectively, over the previous quarter.

Besides, the company’s petrochemicals segment is likely to stay healthy even as key polymer spreads soften from multi-quarter highs. Polyethylene, polypropylene and polyvinyl chloride naphtha spreads, according to Kotak Securities, have seen a year-on-year growth of 14-75% in the first quarter against a 52-108% jump in the preceding three months.

The performance of the upstream segment, Kotak Securities said, will be driven by a sharp sequential increase in gas volumes, reflecting higher production from R-cluster and incremental volumes from satellite fields.

Reliance Jio

Mukesh Ambani’s telecom unit is expected to witness a rise in revenue in the first quarter, aided by wireless and fibre-to-the-home subscriber additions, and continued traction for JioPhone.

But lower recharges during the second Covid wave lockdown are likely to hurt its average revenue per user.

The carrier’s net profit, according to ICICI Securities, may also decline on account of recognition of amortisation and interest cost on Rs 57,100-crore spectrum bought in March 2021 auction.

Motilal Oswal expects Reliance Jio’s Ebitda to come in at Rs 8,300 crore, flat over the preceding three months but a rise of 18% year-on-year.

Reliance Retail

The retail unit’s Ebitda is likely to decline as consumer spends dropped and fewer stores operated amid restrictions due to the pandemic’s second wave. Kotak Securities estimates retail Ebitda to decline 35% sequentially to Rs 2,010 crore.

(Compiled from research reports of Motilal Oswal, Kotak Securities, Emkay, Prabhudas Lilladher and ICICI Securities.)

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