In Charts: How Reliance Industries Fared In The Third Quarter

Reliance Industries Ltd.’s operating profit fell the most in more than four years on a drop in refining margin and weak petrochemicals business.

Operating profit of India’s most valued company fell 5.8 percent sequentially to Rs 12,871 crore, according to its exchange filing. That’s the biggest decline at least since the third quarter of 2015-16.

The billionaire Mukesh Ambani-controlled oil-to-telecom conglomerate faced pressure in its legacy refining and petrochemicals businesses—that constitute more than 60 percent of its operating income—due to a global supply glut.

RIL’s gross refining margin—what it earns for converting every barrel of crude into fuel—fell over the preceding quarter, tracking the decline in benchmark Singapore GRM, on account of weak product spreads and higher freight costs. But that was offset by higher volumes, which helped the refining segment to remain in line with analysts’ estimates.

The company’s petrochemicals segment, however, reported the biggest drop in earnings before interest and tax in at least 17 quarters. Higher raw material costs, coupled with demand uncertainty and supply glut, caused the key product margin to drop to a decade-low.

The retail segment’s EBIT rose for 15 straight quarters. Despite an economic slowdown, the segment’s EBIT increased 58 percent over the last three months. That was mainly aided by higher same-store sales growth, new store openings and rising contribution from its high-margin core segments—consumer electronics, fashion & lifestyle and grocery.

Reliance Jio Infocomm Ltd.—RIL’s telecom arm—reported a rise in its average revenue per user for the first time since it started reporting financial results. That was largely due to revenue from interconnect usage charges. Adjusted for IUC, the ARPU remained flat sequentially.

Reliance Jio, however, added fewer subscribers than expected in the reported quarter. It managed to add only 1.48 crore users in the third quarter—also the lowest since it started reporting numbers—as it begun to charge customers for voice calls made to another network.

RIL’s capital expenditure stood at Rs 14,015 crore in the third quarter—the lowest in eight quarters. Still, its gross debt rose 5 percent over the last quarter. But a 14 percent rise in the company’s cash balance kept its net debt in check. RIL aims to become a net debt-free company by the end of FY21.

Watch | the drop in GRMs, petrochemical earnings hurt RIL in third quarter...