Retail, petchem lift RIL to record

Reliance Industries Ltd (RIL) reported an 8.8% rise in its consolidated net profit at Rs 10,251 crore, or Rs 17.3 per share, for the quarter ending December 31, 2018. 

With this, the oil-to-telecom conglomerate has become the first Indian private company to post a quarterly profit of over Rs 10,000 crore.

Despite a fall in the gross refining margins (GRM), profit surged on growth in the petrochemical business, retail vertical and subscriber addition by telecom arm Jio, which saw fifth consecutive profitable quarter, company executives said.

According to a company statement, RIL’s revenues in the third quarter came in at Rs 1,71,336 crore, an increase of 55.9% as compared to Rs 1,09,905 crore in the corresponding period of the previous year.

The revenues from retail and digital services businesses witnessed a year-on-year increase of 89.3% and 51.2%, respectively.  

RIL chairman and managing director Mukesh Ambani said in a statement, “In our endeavour to consistently create more value for our country and stakeholders, our company has become the first Indian private sector corporate to cross Rs 10,000 crore quarterly profits milestone.”

“Competitive cost positions and integration benefits are core to our oil to chemicals (refining and petrochemicals) business, driving sustained performance even in challenging global business environment,” he said.  

Revenue from the petrochemicals segment rose 37.1% on-year to Rs 46,246 crore on increase in price realisations and volumes primarily in polymer products and fibre intermediates. Earnings before interest and taxes or pre-tax profit was at Rs 8,221 crore, up 42.9%.

Pre-tax earnings from refining business declined for the third quarter in a row, falling 18% to Rs 5,055 crore as margins dipped. It earned $8.8 on turning every barrel of crude oil into fuel, outperforming Singapore complex margins by $4.5/bbl. GRM in the year-ago period was $11.6 per barrel. The fall in GRM was on account of "sharp decline in light distillate product cracks on a year-on-year basis."

Refining and petrochemicals unit contributes around three-quarters of overall revenue.

RIL executives said that in an oil price environment that saw heightened volatility, the product prices for the refining and petrochemical business increased in line with 10.4% higher average Brent crude price.

They said the petrochemical business has benefited a lot on account of improvement in 3-4 cracks which helped it in mitigating the fall in production of some other products in the portfolio, though the polymer growth remains muted.

RIL now wants the consumer business to get as big as the company's core energy operations.

V Srikanth, joint chief financial officer, RIL, said during a post-result media briefing that company's consumer business now forms around 25% of the consolidated Ebitda (earnings before interest, tax, depreciation and amortisation).

Since its launch in September 2016, the company's telecom arm Jio, through its aggressive pricing, has forced the incumbents to match rates in order to retain customers, leading to a surge in consumption of voice and data services in the country. While the big rivals have been left bleeding, the smaller ones have exited the market, leaving just three players in the fray - Bharti Airtel, Vodafone Idea and Jio.

Commenting on the change in verification process due to change in e-KYC regulation, Anshuman Thakur, head of strategy and planning at Reliance Jio said digital KYC is not as efficient as the former, and company lost days as retail sellers had to be trained in the new process. However, he added that now the company has managed to reach the same run-rate as was earlier. Run-rate refers to the rate at which the product gets sold.

RIL's exports from India operations were higher by 35.2% at Rs 62,378 crore as against Rs 46,151 crore in the corresponding period of the previous year. Outstanding debt as on 31st December, 2018 stands at Rs 274,381 crore.