RIL reports higher profit, margins; debt also rises
SCORECARD Company reports higherthanexpected GRM of $11.5 per barrel
Energy giant Reliance Industries Ltd (RIL) reported a 11.5% increase in its consolidated March quarter profit after tax to ₹8,053 crore on the back of higher oil refining margins and better earnings from its petrochemical unit. The cash thrown up by these businesses enabled the company to invest aggressively in its telecom venture; yet by the end of March, the firm reported a decline in cash balances and an increase in debt.
RIL’s consolidated revenue rose 43.7% from a year ago to ₹94,825 crore mainly because of increased refining prices and increase in prices of petrochemical as oil climbed. During the March quarter, Brent crude prices averaged $54 per barrel compared to $48.2 a year ago.
The boost to Reliance’s net profit came after it reported a higher-than-expected gross refining margin (GRM) of $11.5 per barrel. GRM refers to a company’s earnings from turning every barrel of crude oil into fuel.
“Refining is in a good spot. This is a ninth consecutive quarter of double digit refining margins for us,” said V Srikanth, joint chief financial officer of RIL
Ahead of the earnings, RIL shares closed at ₹1,416.95, up 1.23% on the Bombay Stock Exchange while the benchmark index closed at 29,655.84 points, up 0.99%.
RIL is the operator of the world’s biggest oil-refinery complex with a refining capacity of 1.24 million barrels of oil per day, at Jamnagar in Gujarat.
Still, the continued investment in Jio — where RIL has invested ₹1.79 lakh crore so far and guided to tamp up to ₹2.5 lakh crore by fiscal 2020 — has meant a depletion in cash balances and increase in debt.
The business would be critical to RIL’s performance in the future, Abhijit Bora who tracks RIL for BNP Paribas said.
“Financial performance of telecom venture remains important for consolidated earnings outlook in the near to medium term.”
The firm’s consolidated debt at the end of March was ₹1.96 lakh crore compared to ₹1.8 lakh crore a year ago. Cash and cash equivalents were at ₹77,226 crore down from the ₹89,969 crore a year ago.
For the just ended fiscal year, RIL spent ₹1.15 lakh crore in capital expenditure, said joint CFO Srikanth.
“Debt (is) higher on account of investments in Jio and refining,” said Srikanth. “The good news is our capex cycle from hydrocarbon point of view and every other aspect is over and I don’t expect anything meaningful in 2017-18. It is more the time for the cash flows to start for us.”
Apart from refining and petrochemicals, the company’s retail business reported a 83%growth in revenues and 65.6% growth in earnings before interest and taxes. It said that it would spend ₹2,500 crore this year to expand to over 500 retail outlets. The oil and gas business continued to drag down profits with a ₹486 crore loss.