RIL’s December quarter net profit up 9%

Reliance Industries Ltd (RIL), the oil-to-yarn and retail-to-telecom conglomerate led by India’s richest billionaire Mukesh Ambani, recorded a 9% growth in consolidated net profit for the quarter ended December 31, 2018. The company’s performance was helped by its petrochemicals, retail, and digital services businesses, which offset the muted show by its crude refining and marketing business.

The conglomerate, which is India’s most valuable company with a market capitalisation of Rs7.18 lakh crore, posted a consolidated net profit of ₹10,251 crore, becoming the first private sector enterprise in the country to cross ₹10,000 crore in net profit in a single quarter. RIL’s revenue in the same period stood at ₹1.71 lakh crore, up 56% year-on-year.

The net profit reported by RIL was above Street expectations. Foreign brokerage BNP Paribas expected RIL’s consolidated net profit for the third quarter of fiscal 2019 to be around ₹9,465 crore.

“In an oil price environment that witnessed heightened volatility through the quarter, RIL has delivered strong quarterly results on a consolidated basis. 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. In our new-age consumer businesses, we maintained robust growth momentum across Retail and Jio platforms and the share of consumer businesses is steadily increasing its contribution to the overall profitability of the company,” RIL chairman Mukesh Ambani said in an earnings statement issued after market hours on Thursday.

RIL had a challenging quarter with respect to its crude refining and marketing business, which is its largest vertical by turnover. Despite recording a 47% year-on-year growth in revenue to ₹1.11 lakh crore, EBIT (earnings before interest and tax) from the business fell 18% to ₹5,055 crore. Revenue from the refining business rose in tandem with rising prices of Brent crude, but profit from the business fell on account of a sharp decline in product margins, due to weak demand for petroleum products globally. However, the company’s reported gross refining margin (GRM) of $8.8 managed to maintain its premium over the benchmark Singapore GRM, which came in at $4.5 for the October-December quarter. RIL’s GRM was significantly lower than the margin of $11.6 it recorded in the same quarter of fiscal 2018 and $9.5 in the July-September 2018 quarter.

RIL’s other core business of petrochemicals saw revenue rising to ₹46,246 crore in the third quarter of the current fiscal, up 37% year-on-year, due to higher volumes and price realisation. Operating profit from the business grew almost 43% over the same period to ₹8,221 crore.

The retail business, on the other hand, recorded stellar earnings growth with EBIT growing 210.5% year-on-year to ₹1,512 crore and revenue growing 89% to ₹35,577 crore in the same period. The retail operations’ operating profit margin also expanded to 4.2% in the December 2018 quarter from 2.6% in the December 2017 quarter.

RIL’s broadband wireless and digital services business, which operates under its subsidiary Reliance Jio Infocomm (Jio), also continued the earnings growth momentum exhibited in previous quarters. Turnover from the segment rose 51% to ₹12,302 crore and EBIT grew 64% to ₹2,362 crore. The telecom business saw a stable average revenue per user (ARPU) of ₹130 per month. Jio reported that it had 280.1 million subscribers as on December 31, 2018. Compared to the numbers reported in the preceding quarters, it appears that the rate of addition of subscribers on its network is gradually tapering.

RIL’s share price closed at ₹1,133.75 on the BSE on Thursday, down 0.03% from its previous close. The bourse’s benchmark equity index, S&P BSE Sensex, gained 0.15% to end the day at 37,374.08 points.