RIL Q2 Results: Profit, Revenue Fall Despite Telecom, Retail Cushion
Mukesh Ambani, billionaire and chairman and managing director of Reliance Industries Ltd. (Photographer: Simon Dawson/Bloomberg)

RIL Q2 Results: Profit, Revenue Fall Despite Telecom, Retail Cushion

Reliance Industries Ltd. saw its quarterly profit decline as demand for fuel remained subdued and refining margins continued to fall amid the Covid-19 pandemic. That, however, was cushioned by the performance of retail and telecom units of India’s largest company by market capitalisation.

The Mukesh Ambani-led conglomerate’s profit fell 6.6% year-on-year to Rs 10,602 crore in the July-September period, according to its exchange filing. That compares with the Rs 8,194-crore consensus estimate of analysts tracked by Bloomberg.

  • Revenue fell 24% over last year to Rs 1.16 lakh crore—higher than the estimated Rs 1.11 lakh crore.
  • Operating profit fell 16.2% to Rs 18,945 crore.
  • Operating margin widened to 16% from 14.4% earlier.
  • Gross refining margin—what RIL earns for refining one barrel of crude—fell to $5.7 per barrel.

Global fuel demand fell sharply after countries imposed lockdowns to curb the Covid-19 pandemic. Lower demand led to a decline in output by refineries. In India, too, demand for petrol and diesel fell in April and most of May, hurting refining margin. While domestic demand improved as the nation gradually lifted the shutdown, margin remained under pressure.

The Singapore gross refining margin—the Asian benchmark for what a refiner earns on processing every barrel of crude—settled at $0.05 per barrel during the quarter ended September compared with minus $0.9 in the preceding three months. Brent crude price, too, ended flat in the second quarter.

Still, the hit on RIL’s mainstay oil and gas business—that contributes nearly half of the company’s revenue—was cushioned by Reliance Jio and Reliance Retail. Both its consumer-focused units have attracted massive investor interest in recent months, tying into Ambani’s larger plan of building a tech giant on the lines of Amazon Inc. and Tencent.

Reliance Jio, which houses all of Ambani’s digital ventures, saw profit rise 13.2% on the back of higher subscriber addition and tariff hikes. Retail revenue fell 4% but was higher sequentially as customers continued to purchase groceries online despite lockdown curbs.

On a quarterly basis, 85% of the Ebitda growth has come from telecom and retail, Deputy Chief Financial Officer V Srikanth, said on a post-earnings conference call.

After a funding blitz that saw Jio Platforms raise over Rs 1.5 lakh crore from investors like Facebook, Google and Intel, Ambani is now trying to replicate the same at the retail unit.

Reliance Retail has raised over Rs 37,000 crore in over a month as Asia’s richest man tries to upend online retail, content streaming, digital payments, education and health care in one go. That, in turn, allows him to shift RIL’s dependence on legacy businesses like refining to his consumer units.

Shares of RIL closed 1.37% higher ahead of the results, while the benchmark BSE Sensex fell 0.34%.

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