Conglomerate Reliance Industries (RIL) reaped the benefits of the endurance of its oil business, the increasing popularity of its digital services and strong growth of its retail unit to ride out a tough quarter with better-than-expected earnings.
The combined performance of these businesses helped the company top projections of analysts and fend off the coronavirus slowdown with the first quarter results released on July 30. RIL reported a consolidated profit of Rs 13,248 crore for the first quarter of FY21 with Jio's ARPU growth of 7.4 percent QoQ at Rs 140.3 per subscriber per month beating Street expectations.
"The severe demand destruction due to global lockdowns impacted our hydrocarbons business but the flexibility in our operations enabled us to operate at near normal levels and deliver industry leading results," Mukesh Dhirubhai Ambani, Chairman and Managing Director said.
"Our consumer facing businesses became the life-line for individuals and businesses with our Retail and Jio teams working hard to ensure millions got essential goods and services through the lockdown," he added.
Consolidated profit during June quarter 2020 (which included exceptional gain of Rs 4,966 crore from stake sale to BP in Reliance BP Mobility) increased 102.4 percent sequentially and the year-on-year increase was 30.6 percent.
Consolidated profit in March quarter 2020 stood at Rs 6,348 crore and Rs 10,141 crore in the corresponding period of last year.
In the March quarter, the company had reported an exceptional loss of Rs 4,267 crore due to fall in oil prices. Profit before the exceptional item was at Rs 10,813 crore.
RIL beat D-Street estimates in what according to most analysts was a tough quarter. Jio, Retail, and oil-to-chemical (O2C) all contributed to fight COVID induced slowdown.
Reliance's consolidated revenue for the quarter stood at Rs 1,00,929 crore compared to Rs 1,51,461 crore QoQ and Rs 1,74,087 crore year-on-year.
A CNBC-TV18 analysts’ poll pegged revenue 16 percent lower YoY at Rs 1.14 lakh crore. Earnings before interest, tax, depreciation and amortisation (EBITDA) 15 percent lower at Rs 18,511 crore. PAT at Rs 8,374 crore.
Its EBITDA came in at Rs 16,875 crore in June quarter against Rs 21,782 crore in previous quarter, while margin at 19.1 percent in June quarter expanded sharply from 16 percent in March quarter, beating Street expectations.
Ambani said Reliance Industries completed the largest fund raise in Indian Corporate history in this quarter. I thank the millions of individual investors who supported our Rights Issue and welcome all our new partners to an exciting new phase of growth at Reliance.”
RIL's digital unit Jio Platforms, which raised Rs 1,52,056 crore during the quarter under review from some of the world’s top tech investors led by Facebook, was one of the few companies to have grown during the coronavirus lockdown.
With the fund raising from stake sale in Jio Platforms, Rights issue of Rs 53,124 crore and stake sale to BP in petro-retail joint venture, Reliance achieved its net debt free target in June 2020, which is well ahead of its timeline March 31, 2021.
Reliance Industries said it, post completion of these investments, would hold 66.48 percent equity stake in Jio Platform on a fully diluted basis.
"Of the total investment, Jio Platform Limited has already received Rs 1,15,694 crore as subscription amount from ten investors. Rs 22,981 crore will be retained at Jio Platform to drive future growth," it added.
Work from home boosted Jio’s data consumption. Reliance Jio, the wholly owned subsidiary of billionaire Mukesh Ambani-owned Reliance Industries, has reported profit at Rs 2,520 crore for the June quarter 2020, rising 8.1 percent over Rs 2,331 crore in March quarter.
Average revenue per user (ARPU) for the June quarter at Rs 140.3 per subscriber per month grew by 7.4 percent compared to Rs 130.6 in previous quarter. It was much higher than street expectations.
Prakash Diwan of Altamount Capital told CNBC-TV18 that there is no reason why Jio ARPU won't go up further. "Retail will be the next big galloping horse. We don't expect any selling pressure on RIL stock and Rs 2,300 zone may get tested in August," he said.
The stock touched a record high of Rs 2,198.70 on July 27 and brokerages increased their target price due to deleveraging of the Balance Sheet and stake sale in Jio Platforms to global investors and technology players.
In fact, it has been the biggest gainer among Nifty stocks, rising 145 percent from its March 23 low, and gaining 41 percent year-to-date.
Work from home (WHF) boosts Jio’s data consumption and despite lockdown restrictions, the subscriber base grew robustly to 398.3 million at the end of June quarter (compared to 388 million in March quarter) as both voice and data traffic surged.
Total wireless data traffic during the quarter was at 1,420 crore GB (30.2 percent YoY growth) with strong customer engagement and best-in-class network performance, company said.
Jio's revenue in June quarter increased 11.6 percent sequentially to Rs 16,557 crore, and EBITDA surged 17.4 percent quarter-on-quarter to Rs 7,281 crore and margin jumped 220 bps QoQ to 44 percent during the quarter, which all came in above analysts expectations.
Revenue was expected at Rs 15,800 crore with EBITDA at Rs 6,700 crore and margin at 42.4 percent for the quarter, according to CNBC-TV18 poll estimates.
Two RIL platforms -- JioMart and JioMeet -- which were rolled out during Q1 benefitted from huge downloads.
JioMart beta version was launched in 200 cities to meet consumer needs. Both voice and data traffic surged.
Reliance Retail: Against the backdrop of a challenging environment, where store functioning and digital commerce fulfilment was severely impacted by lockdown and restrictions (50 percent stores were fully shut, 29 percent partially operated), Reliance Retail clocked significant revenues of Rs 31,633 crore and EBITDA of Rs 1,083 crore in the quarter, company said.
"The performance whilst muted by the operating context, was well ahead of market," it added. Retail revenue in June quarter 2019 was at Rs 38,216 crore and EBITDA at Rs 2,060 crore.
RIL said EBITDA was positive and resilient despite the limitations in the quarter, with cost management initiatives leading to fixed cost savings, which helped cushion the impact of lower profits from lower sales.
Despite gross margin expansion and cost savings, EBITDA margin was impacted by fixed costs and adverse mix (with the most profitable Fashion & Lifestyle categories being hit the hardest), coming in at 3.8 percent during the quarter against 6.0 percent during the corresponding period of the previous year, it added.
Reliance said the quarter saw 21 percent growth year-on-year across the operational businesses of Grocery and Connectivity, while Consumer Electronics and Fashion and Lifestyle businesses were hit particularly hard by the cessation of activity during the lockdown period, as stores were closed for the most part of the quarter.
On the petrochemicals front, Reliance said revenue for Q1FY21 declined by 33 percent YoY to Rs 25,192 crore primarily due to lower price realizations with disruptions in local and regional markets amid COVID-19 outbreak.
EBITDA for the quarter declined 49.7 percent YoY to Rs 4,430 crore. "Weak domestic demand and higher share of exports impacted margins as compared to regional benchmarks. The impact of lower realization was partially offset by cost optimization and integration benefits," company said.
Q1 was a very challenging quarter as due to lockdown, domestic industry and supply chains virtually came to a halt as both producers and converters shut down plants across India, it added.
In case of refining and marketing business, Reliance said revenues for June quarter 2020 declined by 54.1 percent year-on-year to Rs 46,642 crore due to lower crude oil price and lower throughput.
Brent crude price averaged at $29.2 a barrel during the quarter versus $68.8 a barrel in Q1FY20, down 57.6 percent YoY.
Regional Benchmark Singapore Complex Margins turned negative for the first time in 2 decades and averaged at $-0.9 a barrel.
Reliance said its gross refining margins at $6.3 a barrel was impacted by lower product cracks and narrower light-heavy crude differential. However, it maintained a significant premium of $7.2 a barrel over regional benchmark margin.
Refining and marketing EBITDA declined to Rs 3,818 crore (down 25.8 percent YoY) due to weak margin environment and lower throughput, RIL said, adding refining segment profitability was sustained through optimized crude procurement, relatively higher utilization, cost management and agile product placement.
RIL is now one of the 50 most valued companies globally with a market capitalisation of Rs 13.92 lakh crore at its record high price.
Promoters' shareholding stood at 50.37 percent in the June quarter up from 50.07 percent in the March quarter, while foreign portfolio investors (FPIs) raised their stake to 24.72 percent from 24.05 percent in the same period.
(This is a developing story. Check back for latest updates)Disclaimer: Reliance Industries is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments which publishes Moneycontrol