Jio, retail, and refining push RIL’s Q3 net profit up 13.5%

Reliance Industries Ltd (RIL), India’s largest company by revenue, recorded a 13.5% year-on-year rise in consolidated net profit to ₹11,640 crore for the quarter ended December 31, 2019. The company’s consolidated revenue came in at ₹1.68 lakh crore for the same period, down 1.4% compared to the corresponding year-ago period.

Mukesh Ambani-led RIL’s earnings for the third quarter of fiscal 2020 reflected the weakness in its petrochemicals business, partially offset by growth in its crude refining and marketing divisions, and consumer-focussed businesses like telecom and retail. In its earnings statement, RIL, which is ranked No.1 on the list of Fortune India 500 companies for 2019, said the decline in revenue was on account of its oil-to-chemicals business, which was impacted by lower product price realisation and lower prices of Brent crude during the period.

On a sequential basis, revenue rose 2.5% and net profit declined 1.2%.

RIL’s earnings were broadly in line with analysts’ estimates. In a results preview report, Edelweiss Securities had anticipated RIL’s net profit to come in at ₹11,436 crore. The oil-to-yarn and retail-to-telecom conglomerate’s profit before depreciation, interest and tax (PBDIT) for the October-December quarter stood at ₹26,088 crore, up 9.6% year-on-year. RIL’s PBDIT margin for the period stood at 15.4%.

Commenting on the results, RIL chairman Mukesh Ambani said in the statement: “The third quarter results for our energy business reflects the weak global economic environment and volatility in energy markets. Within our O2C chain, downstream petrochemicals profitability was impacted by weak margins across products with subdued demand in well-supplied markets. Refining segment performance improved in a difficult operating environment given our continuous focus on cost positions, high operating rates and product placement.”

Ambani also said that he was pleased with the progress of RIL’s consumer businesses which continue to establish “new milestones every quarter”. At its retail business – through which it sells everything from grocery to consumer durables and apparel – same-store sales grew and footfall rose.

RIL’s gross refining margin (GRM) – or the difference between value of petroleum products sold and cost of refining crude – for the December quarter stood at $9.2 per barrel, in line with Street expectations. With this, RIL substantially widened the premium that its refinery in Jamnagar, Gujarat, commands over the regional benchmark Singapore GRM, which averaged $1.6 per barrel during the same quarter. Regional GRMs weakened sequentially due to a steep decline in fuel oil cracks and lower middle distillate cracks.

Revenue from the retail business grew 27.4% year-on-year to ₹45,327 crore and a segment EBIT (earnings before interest and tax) of ₹2,389 crore. EBIT margin from the business grew to 5.3% during the quarter, from 4.2% in the October-December 2018 quarter.

RIL’s digital services business, housed under the newly created vertical called Jio Platforms Ltd (Jio), saw its turnover grow 36.2% year-on-year to ₹17,555 crore. EBIT from the business saw a massive 63.3% rise to ₹3,857 crore, yielding a profit margin of 22%. At the end of December, Jio had 370 million subscribers. Jio is now India’s largest telco by both subscriber and revenue market share.

Jio lost 22.3 million subscribers (heavy voice services users) during the quarter, the company said, due to implementation of higher tariffs on account of pass-through of Interconnect Usage Charges (IUC). With the elimination of these users upon the enforcement of IUC charges, Jio has become a net recipient of access charges within two months. Average revenue per user (ARPU) during the quarter came in at a healthy ₹128.4, a steep increase from ₹120 during the July-September 2019 quarter.