RIL’S net profit falls 7% in Q1, beats estimate

Exceptional gains in year-ago quarter pull down profit; digital services key driver

Mukesh Ambani-led Reliance Industries (RIL) posted a consolidated net profit (attributable to owners of the company) of ~12,273 crore for the first or June quarter of 2021-22 (Q1 FY22), a year-on-year (YOY) and quarter-on-quarter (QOQ) decline of about 7 per cent. Yet, it was higher than the Bloomberg consensus estimate of ~11,280.4 crore.

Consolidated net revenue for Q1 FY22 stood at about ~1.40 trillion. While it was 58.6 per cent higher than the ~88,253 crore reported in the yearago quarter, it came in lower that the consensus estimate of about ~1.46 trillion. The performance was driven by the strong show of the oil & gas and Jio businesses, and would have been better but for the pressure in the retail business.

Consolidated net profit was 7.3 per cent lower from ~13,233 crore reported in Q1 of FY21. That, however, was boosted by ~4,966 crore of exceptional income arising from the sale of a 49 per cent stake in the fuel retail joint venture with BP.

Earnings before interest, taxes, depreciation and amortisation (EBITDA), which reflect the operating performance of the company, stood at ~27,550 crore in the quarter under review. This was 27.6 per cent higher than the ~21,585 crore EBITDA reported in the year-ago quarter, and also higher than expectations of ~23,547.3 crore.

In a statement to the BSE, RIL said its retail business continued to be hit. “The group’s operations and revenue were impacted due to Covid-19. During the quarter, there is no significant impact other than in Retail segment,” the company said.

Segment wise, the significant improvement was reported by the oil to chemicals (O2C) and digital services (Jio; up 10 per cent YOY) business. O2C revenue was up 75 per cent YOY to more than ~1.03 trillion, and its EBITDA was up 50 per cent at ~12,231 crore in Q1 FY22, led by higher oil and product prices. Jio revenue was up 10 per cent YOY at ~23,403 crore, while EBITDA was up 18.8 per cent YOY at ~9,268 crore. A company presentation said that RIL also saw good traction in subscriber addition and data usage in the Jio business.

The turnaround has been led by the ramp-up of gas production from the KG-D6. RIL said it was producing 18 million standard cubic metres a day of gas from the KG basin.

“In our O2C business, we generated strong earnings through our integrated portfolio and superior product placement capabilities. Along with our partner bp, we commissioned the satellite cluster in KG D6 and continued to ramp up production, contributing to 20 per cent of gas production in India,” Chairman and Managing Director Mukesh Ambani said. From the telecom vertical, RIL said that Jio’s total data traffic was 20.3 billion GB during the quarter (YOY growth of 38.5 per cent). Total voice traffic was 1.06 trillion minutes, up 19.5 per cent YOY.

“Average Revenue Per User (from Jio) for Q1’FY22 was ~138.4, with improved subscriber mix and better seasonality being offset by Covid impact,” RIL said.

On the retail front, RIL said that the focus on scaling up digital commerce and merchant partnerships helped partially alleviate the loss of business due to store closures. These streams contributed a sizable 20 per cent of retail sales in the quarter.

Reacting to the results, Ashish Chaturmohta, director (research), Sanctum Wealth Management, said, “Overall numbers are decent taking into lockdown in India for several days in Q1 followed by rising oil prices. However, RIL’S vision of diversifying from chemical to retail has started to play out strongly.” The results came after the market hours on Friday. The company’s GDR, listed on the London Stock Exchange, traded flat.