RIL Q3 Results: Consolidated Net Profit Rises 12.6% On Digital, Petchem Push
Reliance Industries Ltd.’s quarterly profit rose as demand for its petrochemicals increased and its digital services arm clocked higher sales.
The Mukesh Ambani-led conglomerate’s profit rose 12.6% year-on-year to Rs 13,101 crore in the quarter ended December, according to its exchange filing. That compares with the Rs 11,313-crore consensus estimate of analysts tracked by Bloomberg.
Besides digital services and petchem business, fall in total expenditure and reduced tax expenses also aided quarterly profit.
- Revenue fell 23.1% over last year to Rs 1.18 lakh crore—lower than the estimated Rs 1.2 lakh crore.
- Operating profit fell 5.2% to Rs 21,566 crore.
- Operating margin widened to 18.3% from 14.8% earlier.
Global demand for fuel remained subdued, hurting refining margins of India’s largest company by market value. The crack margins for key fuels like gasoline and diesel remained weak in the third quarter. While the benchmark Singapore gross refining margins recovered from $0.1 per barrel in the second quarter to $1.2 per barrel in the third, it's way below pre-Covid levels.
The company, however, stopped providing the gross refining margin from the third quarter as the refining and petrochemicals business segments have been reorganised into oil-to-chemicals business, Srikanth Venkatachari, joint chief financial officer at Reliance Industries, said in an post-earnings analyst call. "O2C reorganisation enables reducing feedstock costs and improved product realisation."
Petrochemicals aided the earnings as prices of these products rose on higher demand amid weaker supply. Compounds used to make plastics, resins and drugs rose in the third quarter as several countries in Asia and the Middle East resumed work after emerging from pandemic-induced lockdowns.
Demand for polymers rose 8% and for polyester surged 39%, taking it above the pre-Covid level, said Venkatachari. Oil demand rose 8% to nearly 99% of the pre-pandemic levels, while gasoline and diesel demand crossed it.
Shale Gas Impairment
The company recognised impairment of Rs 15,691 crore on its shale gas investments due to the market environment, reduction in activity by operator and recent operational performance. It also recognised deferred tax assets worth Rs 15,570 crore because of the difference between the book value and tax base of the shale gas operations. The net impact of this is recognised as an extraordinary item of Rs 121 crore.
Reliance discontinued providing results for Reliance Jio Infocomm Ltd. Instead, it started disclosing earnings of Jio Platforms Ltd., the holding company for digital ventures and the telecom unit. This business saw profit rise 15.5%, helped by Jio's stable market share and 4.1% increase in average revenue per user.
Earnings before interest and taxes of Reliance Retail Ltd. rose 8.9% year-on-year and also increased sequentially, helped by higher sales across categories. It added more stores and as people continue to order groceries from its online platform, JioMart, well after lockdown restrictions were curbed. The topline was lower as the petroleum retail business was hived off into the joint venture with BP Plc.
Reliance Retail saw 96% (52% fully operational) of its stores operational compared to 85% (43% fully operational) in second quarter, said Dinesh Thapar, chief financial officer of the unit in the post-earnings call. Overall footfalls were at 75% of pre-Covid level.
Reliance Retail Ebitda stood at Rs 3,087 crore at the end of third quarter. The operating income was driven by lifestyle and apparel businesses, which doubled over the second quarter. Investment income of Rs 775 crore also aided Ebitda.
Shares of Reliance Industries closed 2.45% lower before the results were announced compared with a 1.5% decline in the benchmark Nifty 50.