A Reliance Industries Ltd. petrochemical plant is pictured at night in Jamnagar, Gujarat, India. (Photographer: Rajan Chaughule/Bloomberg News)

Q2 Results: Reliance Industries’ Profit Meets Estimates On Petchem Boost

Reliance Industries Ltd.’s profit in the July-September quarter met estimates as a strong performance by its petrochemicals business offset the weakness in its mainstay refining unit.

The Mukesh Ambani-led company’s standalone profit increased 0.4 percent over the previous three months to Rs 8,859 crore in the quarter ended September. That’s in line with BloombergQuint’s estimate of Rs 8,853 crore.

  • Revenue rose 5.5 percent to Rs 96,167 crore on a quarterly basis
  • Operating profit fell 1.7 percent to Rs 14,892 crore.
  • Operating margin contracted 110 basis points to 15.5 percent.
  • The gross refining margin declined to $9.5 per barrel from $10 earlier.

Reliance Industries couldn’t fully capitalise in a quarter when global oil prices were soaring. That’s because it shut down a fluid catalytic cracking unit at its key petroleum refinery in the Jamnagar Special Economic Zone in Gujarat. The unit that processes over 500,000 barrels of crude oil per day was shut for two weeks and had an impact on the overall refining business’ output. That was offset by the petrochemicals business.

“Petrochemicals has helped saved the day,” said Nitin Tiwari, an analyst at Antique Stock Broking. “Because depreciation in currency has helped and production has also gone up. Also, with increased use of ethane their margins have also improved.”

The petrochemicals would’ve done better largely because of a weaker currency which helps petchem earnings. That has helped offset the weaker refining margins.
Nitin Tiwari, Analyst, Antique Stock Broking

The Mukesh Ambani-led firm is looking to go beyond its mainstay oil and gas business to drive profitability. He's already disrupted the country's telecom industry with his upstart Reliance Jio Infocomm Ltd. Now he wants to take on the country's e-commerce businesses. In fact, Reliance's organised retail business was its fastest growing segment this quarter.

Ambani has been on a deal-making spree this year to expand Reliance Industries' consumer offerings. A Bloomberg analysis showed that ten out of the twelve deals he's struck this year are related to his consumer and retail business. The acquisition streak highlights Ambani’s ambition to make the telecom, retail and media business as big as Reliance Industries' legacy petrochemicals and refining business.

Shares of Reliance Industries rose 29.3 percent in the July-September period. The stock ended 0.33 percent higher today ahead of its earnings announcement.