Reliance Industries Posts 15% Profit Drop as Pandemic Hits Oil Demand

(Bloomberg) --

Reliance Industries Ltd., India’s most valuable company led by billionaire Mukesh Ambani, reported a 15% decline in profit for the quarter through September, as the coronavirus pandemic gutted demand for transportation fuels.

• Net income fell to 95.7 billion rupees ($1.28 billion) from 112.6 billion rupees a year earlier, the Mumbai-based company said in an exchange filing Friday. That compares with the average 90.17 billion-rupee profit estimated by analysts.
• Revenue at the refining-to-retail conglomerate fell 24% to 1.16 trillion rupees.

Key Insights

• Reliance is among oil refining giants slammed by a plunge in demand for transportation and aviation fuels as the raging pandemic stifled demand, forced people to stay home and pushed many economies into recession.
• Reliance is in the midst of a transformation led by Ambani, 63, as he looks to mold the oil-and-petrochemicals giant into a technology titan by boosting its telecom and e-commerce businesses.
• The earnings also underscore the growing need for the conglomerate to pare its dependence on the energy sector and pivot to consumer businesses that aim to tap India’s population of more than a billion.
• Ambani’s bet on digital and retail services in India has won investments of more than $25 billion from investors including Google and Facebook Inc. this year despite the pandemic. Reliance also raised $7 billion through a rights issue.
• As a result of the fundraising, Reliance said it became a zero-net-debt firm in June, months ahead of its March 2021 target. Investors are still awaiting the proposed stake sale in Reliance’s oil-to-chemicals business to Saudi Arabian Oil Co. -- a deal that Ambani said in July was delayed.

Market Reaction

• Ambani’s deals frenzy fueled a 31% rally in Reliance’s shares in the quarter ended September, bringing the year’s gains to 37%. The benchmark S&P BSE Sensex has lost 4% this year. Earnings were announced after trading hours.

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• Digital unit, Reliance Jio reported a net income of 28.44 billion rupees vs. 9.9 billion rupees y/y
• Retail Ventures’ quarterly profit came in at 95 million rupees
• Reliance’s gross refining margin -- or profit from refining a barrel of crude oil into fuels -- fell to $5.7 per barrel compared to $9.4 a year earlier
• Total costs fell 22% from a year earlier to 1.1 trillion rupees
• Gross debt stood at 2.79 trillion rupees at the end of the quarter

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