Reliance Industries Q3 Preview: RIL’s Premium To Singapore GRM May Jump To Highest In At Least 12 Years 
Reliance Industries’ Jamnagar refinery in Gujarat. (Photographer: Rajan Chaughule/Bloomberg News)

Reliance Industries Q3 Preview: RIL’s Premium To Singapore GRM May Jump To Highest In At Least 12 Years 

Reliance Industries Ltd.’s premium to Singapore gross refining margin may jump to the highest in at least 12 years after the benchmark of profitability for crude refiners tumbled in the quarter gone by.

The Singapore GRM plunged 74 percent sequentially to average at $1.7 per barrel in the three months ended December, the lowest in at least eight years, according to data compiled by BloombergQuint. That’s because of a fall in margin of fuel oil—a residue of petrol, diesel and jet fuel—as ships across the world opted for a cleaner alternative. It took a further hit when margin of other products, like diesel, didn’t rise much, owing to a slowing economy and excess supply in the global market.

Lower gross refining margin means that a refiner will earn less for converting every barrel of crude into fuel. But India’s most-valued company has little to worry about as it doesn’t produce fuel oil.

Better refining margin, coupled with a rise in throughput, is expected to lead to a 13.6 percent jump in earnings before interest and tax of RIL’s refining segment in the three months ended December. That’s the most in 10 quarters. Plant shutdowns had impacted throughput of the oil-to-telecom conglomerate in the second quarter.

RIL’s petrochemical segment, however, is expected to report its biggest decline in EBIT in at least four years on a fall in product spreads—difference between raw material costs and selling price. But some of this might be offset by lower feedstock prices and higher volumes.

Standalone net profit of the company is estimated to remain flat in the third quarter, but the consolidated earnings may rise 4 percent over last quarter, helped by its consumer businesses.

The performance of Reliance Jio Infocomm Ltd., the telecom arm of the billionaire Mukesh Ambani-controlled group—will be aided by higher subscriber additions, tariff hikes and new plans bundled with interconnection usage charges. Jio, according to analyst estimates compiled by BloombergQuint, is expected to add close to 2.2 crore subscribers in the quarter ended December.

Its average revenue per user may rise for the first time since it started recognising revenue and expenses for charging customers in the second quarter of 2017-18.

Earnings before interest and tax of RIL’s retail segment will be aided by its high-margin core businesses. But the pace is expected to be the slowest in 13 quarters.

What to watch out for in RIL’s Q3 Results 2019-20

  • GRM outlook ahead of the implementation of IMO 2020 regulations.
  • Updates on commissioning of petcoke gasifiers.
  • Clarity on InvIT valuations for Reliance Jio’s fibre assets.
  • Updates on Capex and debt reduction plans.
  • Clarity on startup of gas field.
  • Commentary on telecom subscriber net additions post tariff hikes.

(The data has been compiled from BOBCAPS Research, SBICAP Securities, Kotak Securities, Motilal Oswal, Edelweiss, Elara Securities, Emkay, Equirus, Prabhudas Lilladher, Jefferies, Centrum Broking, Sharekhan, Antique Stock Broking, Narnolia Securities, Spark Capital, Morgan Stanley, CLSA and Nomura)

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