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Informist, Thursday, Jan. 16, 2025

By Anshul Choudhary

MUMBAI – Reliance Industries Ltd. posted a year-on-year increase in consolidated net profit for Oct-Dec after three quarters of decline. It even managed to beat analysts' expectations as its oil-to-chemicals and retail businesses performed slightly better than expectations, and the telecommunication operations continued with its strong growth.

The conglomerate's consolidated net profit rose over 7% on year to INR 185.40 billion, above analysts' expectations of INR 178.30 billion. Its consolidated revenue rose nearly 7% on year to INR 2.44 trillion, also beating expectations of INR 2.35 trillion.

During the quarter, the company recovered from the poor performance in the September quarter, when revenue growth was largely flat. Sequentially, the company reported a nearly 12% rise in its consolidated net profit, which was the best growth figure in seven quarters. At the same time, revenue rose 3.6% compared to the previous quarter.

Analysts had expected strong growth in its telecommunication business, which includes the fast-growing Reliance Jio. However, growth in the largest business of oil-to-chemicals was a positive surprise as several analysts had expected this segment's operating profit to decline on year. The performance of this segment was driven by higher production amid better demand for oil globally. At the same time, growth in the retail segment was above expectation, and it was led by better demand during festivals across products with higher footfall in stores, and registered customers.

OIL-TO-CHEMICALS SEGMENT

Revenue from the company's largest vertical grew 6% on year to INR 1.50 trillion in Oct-Dec primarily on account of higher production meant for sale as compared to the same period last year, which had planned maintenance and inspection shutdown of major units. This strong volume-led growth saw the vertical's earnings before interest, taxation, depreciation and amortisation, or EBITDA, rise 2.4% on year to INR 144.02 billion. Sequentially, EBITDA for the segment rose 16% amid a recovery in refining margins, significantly better than analysts' expectations of 2-10% growth.

The strong volume was aided by higher polymer deltas. The company's feedstock flexibility, benefits of ethane cracking over naphtha and focus on yield optimisation helped offset the impact of unfavourable fuel cracks, Reliance Industries said. "The oil-to-chemicals business showcased its innate resilience, registering growth even in this prolonged period of volatility in the global energy markets. Refining margins recovered sequentially, with petrochemical deltas exhibiting a mixed trend. Upstream segment continues to play a pivotal role in providing the crucial transition fuel bolstering India's energy security," Mukesh Ambani, Reliance Industries' chairman and managing director, said in a press release post the results.

The segment's EBITDA margin during the quarter fell to 9.6% compared with 10% in the year-ago period. Brent crude oil prices averaged $74.7 a barrel in the December quarter, down $9.4 a barrel from the same quarter in 2023. "Crude oil benchmarks fell YoY due to high non-OPEC (Organization of the Petroleum Exporting Countries) production keeping markets well supplied along with, strong US dollar and weak Chinese economy," the company said.

The company's total crude oil throughput during the quarter was 20.20 million tonnes, up 8% compared with the previous year. The production meant for sale was 17.9 million tonnes, which was over 9% higher than the same quarter last year. 

RETAIL SEGMENT

A recovery in revenues and profits marked the earnings performance of Reliance Retail Ventures Ltd., the retail subsidiary of Reliance Industries, for the December quarter. The parent company said in a press release there was a "strong turnaround in Fashion & Lifestyle consumption basket" and a "rapid growth" in its business-to-consumer grocery business. The uptick comes after the previous quarter had seen a decline in revenue.

The revenue from operations of Reliance Retail Ventures increased 7% on year to nearly INR 796 billion in the December quarter. During the previous quarter, its revenue operations had fallen 3.5% on year to INR 665 billion.

Reliance Retail's earnings before interest, tax, depreciation, and amortisation from operations increased nearly 10% on year to INR 66.32 billion. This was better than analysts' expectations, who had baked-in only 1-2% growth in EBITDA. Sequentially, the retail subsidiary's EBITDA rose nearly 17%.

The company said "B2C Grocery grew by 37% Y-o-Y (year-on-year) reflecting rapid growth at significantly higher scale relative to other offline and online grocery players." The company did not specify the quantum of "turnaround" in its fashion and lifestyle segment sales.

The retail business opened 779 new stores in the December quarter, taking the total store count to 19,102 with area under operation at 77.4 million square feet, the company said. In the December quarter, footfall in the retail business increased 5% on year to around 296 million. The number of transactions in the retail business jumped nearly 11% on year to 355 million.

JIO PLATFORMS

Tariff hikes paid off well for Reliance Industries' digital services arm Jio Platforms. The subsidiary's revenue during the quarter rose over 19% on year to INR 330.74 billion, while the same rose over 4% compared to the previous quarter. Its EBITDA rose nearly 19% on year and 4% on quarter to INR 165.85 billion and its EBITDA margin was marginally down to 50.1%. This was largely in line with analysts' expectations.

The company's average revenue per user, or ARPU, for the quarter improved by nearly 12% on year to INR 203.3 per month, which was INR 195.1 a quarter ago and INR 181.7 a year ago. The ARPU was a slight disappointment when compared with analysts' projections, who had hoped for the metric to come at INR 204-INR 208.

The company said tariff hikes and better subscriber mix led to higher revenue and ARPU, adding that the residual impact of the hike is yet to play out fully. The company had announced higher tariffs earlier, which came into effect from July last year.

The subsidiary net added 3.30 million subscribers during the December quarter, taking the total subscriber base to 482.1 million, a growth of 2.4% compared to the previous year. The company said Jio Platforms' customer addition is now back to pre-tariff-hike levels.

OIL AND GAS

Revenue from the company's exploration business fell to INR 63.70 billion in Oct-Dec, down over 5% from the year-ago period due to lower production from its KG-D6 block, which offset the positive impact of a slightly higher price of gas from this block. The segment's EBITDA during the quarter fell 4% on year to INR 55.65 billion. However, EBITDA for the segment rose 5% sequentially. EBITDA margin for the segment rose to 87.4%, up 100 bps on year.

During the quarter, the average price realisation for KG-D6 gas rose to $9.74 per million British thermal units from $9.66 per mBtu a year ago. For coal bed methane gas, the average realisation fell to $10.58 per mBtu from $15.55 per mBtu a year ago. Total production from the KG-D6 block fell over 5% on year to 68.50 billions of cubic feet equivalent, while the same from coal bed methane rose 35% on year to 2.7 billions of cubic feet equivalent. 

Considering all the businesses, Reliance Industries invested INR 322.59 billion in capital expenditure in the December quarter, over 7% higher than INR 301.02 billion of capex during the same period last year. Its outstanding debt at the end of the quarter was up 12% on year at INR 3.50 trillion, while cash and cash equivalents rose 22% on year to INR 2.35 trillion.  End

US$1 = INR 86.55

With inputs from Sunil Raghu, Rajesh Gajra, and Narayana Krishna

Edited by Deepshikha Bhardwaj

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