FY19 profit may rise 18% on capacity addition: RIL

Profit rises 17.4% led by higher price realizations in petrochem, refinery goods

Capacity additions across its businesses could see Reliance Industries Ltd’s (RIL) consolidated operating profit rise 18% in the year ending March 31.

Earnings before interest, tax depreciation and amortisation (Ebitda) is likely to rise to ₹85,000 crore in the current year, said V Srikanth, joint chief financial officer, RIL. “In FY18, we were at ₹72,000 crore and FY19 (annualising what we have done thus far) we are close to ₹85,000 crore. We are talking about businesses where Ebitda has been doubling and tripling. As you know consumer businesses (retail and telecom) can sustain long trends of increases,” said V Srikanth, joint chief financial officer, RIL.

The Mukesh Ambani-controlled RIL has invested more than $30 billion over the last five years across its refining, chemicals, retail and telecom businesses, to boost capacity.

RIL on Wednesday said net profit rose 17.4% to ₹9,516 crore in the September quarter, led by higher price realisations for petrochemicals and refinery products. “Our integrated refining and petrochemicals business generated strong cash flows in a period of heightened volatility in commodity and currency markets,” said Ambani, chairman and managing director.

Quarterly revenue at the energy-to-telecom conglomerate rose 55% to ₹1.56 lakh crore from ₹1.10 lakh crore in the year earlier.

RIL’s consolidated net sales were expected to come in at ₹1.41 lakh crore, according to a Bloomberg poll of seven analysts. Net profit was estimated at ₹9,630.20 crore, according to 10 analyst estimates.

Gross refining margin, (GRM) or what the company earns from turning every barrel of crude oil into fuel, came in at $9.5 a barrel. RIL’s refining margin dropped below $10 for the first time after 15 quarters. Analysts had expected RIL’s GRM to be in the range of $10-10.5/barrel against the $12/ barrel it reported a year ago.

RIL is the operator of the world’s biggest oil refinery complex with a capacity of 1.24 million barrels of oil per day at Jamnagar in Gujarat.

During the quarter, the benchmark Singapore Complex GRM rose from $6 to $6.2, led mainly by higher fuel oil cracks. RIL however, does not produce fuel oil.

Crude oil price continued its upward trend in September quarter. Average Brent crude price rose 45% from a year earlier and 1% from the preceding three months at $75 a barrel.

For the July-September quarter, revenue from the petchem segment increased 56.2% to ₹43,745 crore, helped by an increase in volumes and price realisations.

RIL shares fell 1.27% to ₹1,148.90 on BSE, while the Sensex shed 1.09% to 34,779.58 points. The earnings were announced after the end of trading in Mumbai on Wednesday.

Its mobile telephony arm, Reliance Jio Infocomm Ltd reported a profit of ₹681 crore for the September quarter, a rise of 11.3% from ₹612 crore in the preceding three months. Revenue from operations rose to ₹9,240 crore from ₹8,109 crore. During the September quarter, Jio added 37 mildirector lion customers, taking the total customer base to 252.3 million.

Its monthly average revenue per user (Arpu) stood at ₹131.7 per subscriber in the quarter. Bharti Airtel, which was the market leader before the merger of Vodafone-Idea Cellular, reported Arpu of ₹105 per subscriber per month during the June quarter.

Bharti Airtel, which hasn’t reported it’s earnings for the September quarter, has seen its Arpu decline sharply during the past few quarters as a result of pricing pressures in the sector due to price wars.

“We, at Jio, are glad with our progress towards our mission with more than 250 million subscribers on our network within 25 months of commencement of services,” Ambani said.

“Our next generation FTTH (fibre to the home) and enterprise services are now being made available to our customers to further enhance our value proposition to our customers.”

RIL on Wednesday announced a strategic investment in Den Networks Ltd. The company invested ₹2,045 crore through a preferential issue of shares and purchase of ₹245 crore worth of stock from the promoters for a 66% stake in Den.

RIL also invested ₹2,940 crore through a preferential issue for a 51.3% stake in Hathway Cable and Datacom Ltd.

The maximum investment in Den and Hathway, including open offers, is likely to be around ₹7,900 crore. RIL will also absorb ₹1,400 crore worth of debt from Hathway, said Anshuman Thakur, head of strategy and planning for Jio.