O2C may be a dampener on RIL earnings

Street will look for updates on new energy biz commissioning schedule

The consolidated profits of Mukesh Ambani-run Reliance Industries Ltd (RIL) for the March 2024 quarter (Q4FY24) are estimated to decline from a year ago.

The company’s oil to chemicals (O2C) business is expected to offset retail and consumer gains, while registering a sequential rise in its segment profits.

In a Bloomberg poll, 12 analysts estimated RIL’S consolidated revenue at ~2.35 trillion and six analysts estimated net income adjusted at ~19,873 crore.

Analysts with ICICI Securities noted: “Reliance (is) likely to show mixed performance during the quarter, with strong operational improvement, but net income may dip on higher depreciation/high tax rate.”

Brokerage firms -Nuvama, Centrum, Prabhudas Lilladher, and ICICI Securities -- on a year-on-year (Y-O-Y) basis estimated a 5-10 per cent dip in net profits/profits after tax for the company.

Earnings before interest, tax, depreciation and amortisation (Ebitda), these firms expect, will rise 7-9 per cent.

Analysts with Nuvama attributed the anticipated rise in Ebitda to likely strong performance across all verticals except O2C. The firm said it expected O2C Ebitda to fall 8 per cent Y-O-Y on weakness in refining and petrochemicals.

For the same period, Nuvama expects the retail segment Ebitda to rise 28 per cent and telecom 13 per cent.

On a sequential basis, however, the O2C segment is expected to report a sharp jump in earnings owing improvement in gross refining margins (GRMS), better petchem spreads, and higher refining throughput, as the December 2023 quarter saw planned shutdowns at some refinery units, analysts with ICICI Securities noted.

Earnings for the company’s oil and gas business in the quarter under review are expected to moderate sequentially due to largely stable volumes and pricing, analysts with Centrum noted.

For RIL’S nono2c business, analysts with Prabhudas Lilladher expect telecom to show steady performance with 2 per cent sequential subscriber growth and flat average revenue per user (ARPU).

The retail segment, the analysts stated, should show resilient profitability sequentially as well.

In management commentary, the street will look for updates on the company’s new energy business commissioning schedule and further guidance on capital expenditure spend and the debt profile. Net debt as of December 2023 was at ~1.19 trillion and consolidated gross debt ~3.11 trillion. srikanth Venkatachari, chief financial officer, RIL, said: “The company is on track to commence new energy facilities in phases by the end of this year.”

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