Reliance Industries Ltd (RIL) reported a consolidated net profit of Rs 18,258 crore for the quarter ended June 2023, down 5.9 percent from a year ago as muted performance in the oil-to-chemicals (O2C) partly offset the strong growth in consumer-facing businesses. Higher finance cost and depreciation also weighed on the company’s bottomline.
The conglomerate’s consolidated total revenue in the June quarter declined to Rs 2.31 lakh crore from Rs 2.42 lakh crore a year ago as oil-to-chemicals segment sales declined tracking the weakness in crude prices.
Consolidated net profit attributable to shareholders stood at Rs 16,011 crore in the quarter, down 11 percent from Rs 17,955 crore in the same period last year.
A Bloomberg poll had seen consolidated net sales at Rs 2.14 lakh crore and net profit at Rs 16,995.50 crore.
EBITDA (earnings before interest, taxes, depreciation, and amortisation) increased by 5.1 percent to Rs 41,982 crore in Q1FY24.
“Reliance’s strong operating and financial performance this quarter demonstrates the resilience of our diversified portfolio of businesses that cater to demand across industrial and consumer segments,” said Mukesh D. Ambani, Chairman and Managing Director.
RIL expects that its robust balance sheet with high liquidity will support accelerated growth plans.
O2C’s weak performance
Revenue for the O2C business, so far the biggest division of RIL, stood at Rs 1.33 lakh crore in Q1FY24, a decrease of 17.7 percent on-year, on account of the sharp reduction in crude oil prices and lower price realisation of downstream products.
EBITDA in the April-June 2023 quarter reduced by 23.2 percent from a year ago to Rs 15,271 crore. The company said that fuel cracks, the difference between the price of a refined product and crude oil, declined 60-70 percent owing to the high base of the previous year when fuel cracks were “exceptionally high”. Polyester margin declined due to subdued demand from China.
“The first quarter of FY 23 was (a) once-in-a-generation dislocation of energy markets, which drove fuel margins to historic levels,” said Chief Financial Officer V Srikanth during a media call.
Although RIL does not report gross refining margins (GRMs) separately, analysts had expected that its GRM would have declined in the quarter tracking the steep fall in the benchmark Singapore GRM.
The O2C business includes refining, petrochemicals, fuel retailing through Reliance BP Mobility Ltd, aviation fuel and bulk wholesale marketing.
The company said that the global oil demand in 1Q FY24 rose by 2.8 million barrels per day (bpd) YoY to 101.4 million bpd, due to higher demand mainly from China, Middle East, and Asia. Jet/Kero and gasoline posted strong demand growth YoY, while diesel demand remained flat, the company added.
Oil & Gas production rises
The company’s oil and gas revenue increased by 27.8 percent on-year to Rs 4632 crore by higher gas price realization and increase in KGD6 volumes with start-up of oil and condensate production from MJ fields.
The average price realised for KGD6 was $10.81 per MMBTU (million metric British thermal unit) in Q1FY24 compared to $9.72 per MMBTU in Q1FY23.
The KG-D6 production for the quarter was 48.3 BCFe (Billions of cubic feet equivalent), up 18.4 percent YoY.
“MJ field commenced production post testing and commissioning activities. First Cargo of about 500,000 barrels of Condensate was sold during the quarter. The current rate of Condensate production is ~17,000 BOPD (barrels of oil per day),” the company said.
Steady uptrend in Jio Platforms
Jio Platforms’ profit for the first quarter stood at Rs 5,098 crore, an increase of 12.5 percent on-year.
The telecom and streaming business segment’s revenue from operations was Rs 26,115 crore for April-June 2023, compared to Rs 23,467 crore in the same quarter a year ago.
Jio Infocomm, the telecom subsidiary of Jio Platform, reported average revenue per user (ARPU), an important metric to measure the performance of telecom companies, increased by 2.8 percent YoY to Rs 180.5 per user per month. Jio Infocomm reported a standalone net profit of Rs 4,863 crore in the June quarter, registering a growth of 12.17 percent year on year.
“Jio is on track to complete pan India 5G rollout before December 2023. The new JioBharat phone is another innovation by Jio combining network and device capabilities to help accelerate ‘2G-MUKT BHARAT’ vision and democratize internet,” said Akash M Ambani, Chairman, Reliance Jio Infocomm Ltd, a subsidiary of Jio Platforms.
Robust retail performance
Reliance Retail posted a net profit of Rs 2,448 crore in the quarter, an increase of 18.8 percent led by growth in grocery, consumer electronics (excluding devices) and fashion & lifestyle.
Revenue from operations stood at Rs 62,159 crore in the quarter, up 19.5 percent on-year. The quarter recorded the highest ever store footfalls at 249 million.
“The sustained growth across consumption baskets has further consolidated our position as a market leader. We continue to innovate and invest in our stores and digital platforms to make shopping more engaging for our customers," said Isha M Ambani, Executive Director, Reliance Retail Ventures Ltd.
RIL media business
Reliance’s media business posted a profit of Rs 29 crore for the quarter under review, which is a decline of 25.6 percent from the same period last year.
Revenue from operations in the segment increased by 141.7 percent to Rs 3,239 crore driven by Viacom18, as IPL on JioCinema delivered record advertising revenues.
The strong performance of JioCinema was driven by the scale, targeting ability, cost flexibility, measurement, and integration options, which offered significant advantages to advertisers on the platform, the company said.
JioCinema’s advertising revenue was higher than TV as the platform attracted more than 13 times the number of advertisers on TV, it added.
Road ahead
RIL CFO V Srikanth cautioned that the voluntary oil production cut by OPEC+ countries may keep crude prices elevated and impact demand. High inflation, subdued global demand, and increased supply from China may affect Indian downstream exports to the US and Europe.
Closer home, the company expects Indian downstream chemical demand to reflect robust economic growth.
The company said its capital expenditure plans remained on track.
“Our net debt has remained flat despite the accelerated capex on the rollout of infrastructure in the consumer business. The capex for the quarter was Rs 39,600 crore which was funded largely by internal accruals of Rs 33,000 crore,” Srikanth said.
RIL’s net debt was at Rs 126,621 crore at the end of June 2023 compared to Rs 125,766 crore three months ago.
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