Russian crude boosts RIL's profitability

Reliance Industries Ltd. (RIL) is riding high on discounted crude oil imports from Russia. In the first quarter, the company posted a 40.8% rise in consolidated profit at ₹19,443 crore on a revenue of ₹ 242,982 crore, which is higher by 53%. The earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 45.8% to ₹40,179 crore. The earnings per share (EPS) surged by 40% to ₹26.5.

The oil-to-chemicals business increased its EBITDA by 62.6% to ₹19,888 crore on account of the higher crude import from Russia at a discount of around 20-25%. The refiners in India have stepped in to purchase discounted Russian crude as Western buyers shun it following Moscow's invasion of Ukraine. India's crude oil imports from Russia have jumped over 50 times since April and now make up for 10% of all crude bought from overseas.

RIL has also boosted its fuel exports, especially to European countries grappling with shortages due to the sanctions on major producer Russia. The EU embargo on Russian oil products, higher gas to oil switching, strong travel demand and lower product inventory levels resulted in tight fuel markets, says the company. The exports (including deemed exports) from RIL’s India operations increased by 71.3% to ₹96,212 crore, mainly due to higher price realisations and higher volumes of transportation fuels.
The revenue from the business increased by 56.7% to ₹1,61,715 crore, thanks to higher crude oil and product prices. Benchmark Brent crude average price was up 65% Y-o-Y to $113.9 a barrel.

“Transportation fuel margins were significantly higher on account of dislocation in energy markets. The Ukraine conflict and resulting embargo on Russian supplies, along with strong travel demand, higher gas to oil switching, lower Chinese exports and low global inventories led to a spike in fuel margins,” the company says.

Mukesh Ambani, chairman and managing director, RIL says, geopolitical conflict along with resurgent demand has resulted in tighter fuel markets and improved product margins. “Despite significant challenges posed by the tight crude markets and higher energy and freight costs, O2C business has delivered its best performance ever,” he says.

The telecom and digital business, Jio Platforms Ltd (JPL) posted a 24.1% increase in profit at ₹4,530 crore when its revenue surged by 23.6% to ₹27,527 crore, driven by the residual impact of tariff hike and acceleration in Fiber to the Home (FTTH). As per TRAI data, Jio has over 80% market share of new customer additions in the wireline segment. The EBITDA was ₹11,424 crore, higher by 28.5%, despite the inflationary pressure on operating costs. The customer base of the telecom giant stood at 419.9 million. The monthly average revenue per user (ARPU) increased by 27% year on year to ₹175.7. The data traffic was 25.9 billion gigabytes during the quarter, higher by 27.2%.

Reliance Retail recorded a 114.2% rise in profit to ₹2,061 crore, while its revenue was higher by 51.9% at ₹58,554 crore, thanks to higher contributions from fashion and lifestyle and consumer electronics. The EBITDA was ₹3,837 crore, higher by 97.8%. The omnichannel retailer has 15,866 physical stores operational with the addition of 792 stores during the April-June period. The area of operation increased to 45.5 million sq. feet as compared to 34.5 million sq. feet in the same period last year.
The retail business witnessed its first quarter without any operating disruptions since the onset of Covid-19. Footfalls were recorded at 175 million for the quarter, which was 19% above the pre-Covid levels. The registered customer base stood at 208 million, up 29% Y-o-Y.

Though store operations returned to normalcy, the digital commerce business continued unaffected and grew 64% Y-o-Y in daily orders. Digital and new commerce grew two times over last year and contributed about 19% of revenue. With a presence in 268 cities, Jiomart is the largest hyperlocal platform in the country, the company claims.

Reliance Retail also enhanced its portfolio through acquisitions and partnerships. It has signed a master franchise agreement with GAP Inc, Tod’s, and Pret A Manger. It acquired Catwalk and the India franchise rights for Sunglass Hut. The supply chain capabilities have been enhanced with the addition of 79 warehousing and fulfilment locations.

The revenues from hydrocarbon exploration and production (E&P) increased by 183% to ₹3,625 crore. The segment EBITDA sharply increased to ₹2,737 crore due to improved gas price realisation in KG D6 and CBM, and higher production in KGD6. The KGD6 gas production (RIL’s share) was at 40.6 billion cubic feet (BCF) vis-à-vis 33.1 BCF. The average gas price realised for KGD6 was at $9.72/MMBTU vs $ 3.62/MMBTU in the same period last year.

RIL’s outstanding debt was ₹263,382 crore and the cash and cash equivalents were at ₹ 205,727 crore.