RIL profit up 25% on Jio, petrochemical business
Consolidated net profit rises to ₹9,423 crore in third quarter
MUMBAI:Reliance Industries Ltd (RIL) reported a 25% increase in quarterly profit, beating analysts’ estimates, as its telecom unit swung to a profit and the petrochemical business posted strong gains.
Consolidated net profit rose to ₹9,423 crore in the quarter ended December from ₹7,533 crore a year earlier, said the country’s biggest company by market value. Revenue rose to ₹1.1 lakh crore, an increase of 30.5% from ₹84,189 crore a year ago, thanks to doubling of sales in retail operations and the addition of Reliance Jio Infocomm Ltd’s numbers.
According to a Bloomberg survey, RIL was expected to post a net profit of ₹8,496.5 crore for the three months ended December 31 on net sales of ₹1.03 lakh crore.
Jio, the company’s telecom unit, reported a net profit of ₹504 crore in just its second quarter of operations as it benefited from the telecom regulator’s decision to halve interconnection usage charges (IUC) effective October 1 and as it added subscribers. That compares with a loss of ₹271 crore in the September quarter.
The telecom business added a net 21.5 million subscribers in the three months ended December, compared with 15.3 million users in the September quarter. At the end of December, Jio had a total of 160.1 million subscribers.
“Profitability is coming from more subscribers coming on the network and the efficiencies of scale,” said Anshuman Thakur, head of strategy and planning at RIL. Jio has signed an agreement to acquire some assets from Reliance Communications Ltd but officials declined to disclose the purchase value. The company incurred a capital expenditure of ₹7,000 crore on Jio in the December quarter.
RIL is investing in expanding its telecom business at a time when it is making record profits in the petrochemical and refining businesses.
The petrochemical business reported record earnings before interest and taxes (EBIT), a measure of operating profitability, of ₹5,753 crore, an increase of 73% from a year ago. That was owing to strong volume growth and higher margins for some products.
The quarter marked the culmination of RIL’s expansion in its petrochemical business, said chairman Mukesh Ambani. RIL reported petrochemical production of 8 million tonnes (mt) in the December quarter, up from 7.5mt in the three months ended September, as a new factory came on-stream. The segment’s operating margin widened 2.5 percentage points to 17.1% from a year ago.
At the EBIT level, the petrochemical business accounted for 57% of RIL’s jump in profit from a year ago.
“The GRM (gross refining margin) is slightly lower than we have done (in the past). The story really is in EBIT for the petrochemical business,” said Srikanth Venkatachari, the company’s joint chief financial officer.
RIL’s GRM, or what the company earns from turning every barrel of crude oil into fuel, was higher than expected at $11.6 per barrel. That was a premium of $4.4 per barrel to Singapore’s benchmark margin. Analysts had expected RIL to post a GRM of $11.5.
Average Brent crude price during the quarter was up 16.21% from last year at $66.87 per barrel.
The retail business reported a near-doubling of revenues and profits before interest and tax.
“The core business could see volume-led and margin-led growth in the coming quarters as capacity additions in petrochemicals are almost complete and gross refining margins could improve due to changes in feedstock,” said Deven Choksey, managing director of KR Choksey Shares and Securities.
“Jio numbers show that it is the beginning of a big success story. Retail segment is also likely to perform well. Though the stock price has moved up, there is further room for upside because valuations of Jio and retail are not fully priced in currently.”
RIL shares closed at ₹929.35 on Friday, up 1.09% on the BSE, while the Sensex gained 0.71% to 35,511.58 points. The firm reported results after the end of trading.