Reliance Profit Misses Estimates on Weaker Refining Business
The Reliance Industries Ltd. logo is displayed at the company’s annual general meeting. (Photographer: Adeel Halim/Bloomberg)

Reliance Profit Misses Estimates on Weaker Refining Business

Reliance Industries Ltd., India’s most valuable company, reported a less-than-expected rise in profit for the fiscal fourth quarter, as its oil-refining business remained weak amid the continued demand destruction caused by the Covid-19 pandemic.

Net income at the company controlled by Mukesh Ambani, Asia’s richest person rose to 132.3 billion rupees ($1.8 billion) in the three months ended March 31 from 63.5 billion rupees in the same period last year, according to an exchange filing Friday. It missed the average 137.04 billion-rupee profit estimated by a Bloomberg survey of analysts.

Revenue at the refining-to-retail conglomerate rose 12% to 1.55 trillion rupees from the same period a year ago.

Key Insights

  • Reliance’s recently spun-off oil-to-chemicals business, which contributed almost three-quarters to the group revenue last fiscal, is yet to see an overall recovery after the pandemic hurt fuel demand and refining margins last year.
  • While sales in the segment rose 4.5% on year, operating profit or EBITDA declined 4.6%
  • V. Srikanth, joint chief financial officer, said profit from the O2C business suffered from a decline in volumes and lower realizations, but is continuing to witness recovery sequentially

    • Asian complex refining margins averaged 72 cents a barrel during the quarter as against 96 cents a year earlier
    • Reliance’s giant refineries processed crude at an average 92% of capacity in the latest quarter, down from full capacity last year before the pandemic impacted run rates
    • The company, along with its partner BP Plc, started gas production from a second field in the KG-D6 block off the east coast of India this month
  • Reliance’s revenue came in at the top end of estimates, buoyed by its consumer businesses, justifying Ambani’s efforts to pivot the conglomerate toward retail and telecommunications servces. The billionaire sold stakes worth $27 billion in these units to global investors including Google and Facebook Inc. last year.
  • Investors are now awaiting clarity on a planned stake sale in Reliance’s oil refining and petrochemicals business. Ambani told shareholders last July that the deal, originally meant to be with Saudi Arabian Oil Co. hadn’t progressed as per the original timeline due to external factors.
  • Phone unit Reliance Jio Infocomm Ltd., which Ambani said will roll out 5G services in India later this year, bought airwaves worth almost $8 billion in March. It was the top bidder in the latest spectrum auctions, underscoring the intent of India’s largest wireless operator to retain its edge over rivals.
  • Reliance continues to be in a pitched legal battle with Inc. over its acquisition of an indebted Indian brick-and-mortar retailer. Ambani and Amazon are fighting for dominance in India’s $1 trillion consumer retail market.

Market Reaction

  • Shares of Reliance rose about 1% in the March quarter, lagging the 3.7% jump in the benchmark S&P BSE Sensex over the same period. Earnings were announced after the close of market hours.

Get More

  • Reliance Jio reported a 47.5% jump in net income to 35.08 billion rupees. It had 426 million users as of end-March: statement
  • The retail unit saw a quarterly profit of 22.47 billion rupees, higher by 45% on-year
  • Total debt, as of March 31, stood at 2.52 trillion rupees, while total costs were 1.43 trillion rupees

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