RIL Q2 results: Overall profit drops, but Jio makes up for decline in core oil-to-chemicals business

Mumbai: Reliance Industries Ltd continued to reap the benefits of its diversified business portfolio in the September quarter, as the weakness in one sector was compensated by gains in others.

India’s most valuable company on Monday reported a consolidated profit of ₹19,101 crore, 4% lower compared to the same period last year. This, despite the contribution from its key oil-to-chemicals (O2C) business declining by a fourth as global demand cooled. Better performance across other key business segments, particularly telecom arm Jio, helped offset the fall in margins at the Mukesh Ambani-led company.

The profits surpassed consensus estimate of ₹18,814 crore in a Bloomberg poll of analysts.

The oil-to-telecom company reported consolidated revenue of ₹2.58 trillion, which was about 1% higher year-on-year. This compares to a Street estimate of ₹2.34 trillion, as per Bloomberg.

Earnings before interest, tax, depreciation and amortization (Ebitda) fell 2% on-year to ₹43,934 crore.

Ebitda margin of 17% was 50 basis points narrower.

“I am happy to note that during this quarter Reliance once again demonstrated the resilience of its diversified business portfolio,” chairman Mukesh Ambani said in a press statement.

The growth in digital services and upstream businesses helped partially offset the weak contribution from the O2C business, he said.

Also read | For Reliance Industries, Jio remains the jewel in the crown

Refineries, oil and gas take a hit

The O2C business revenue was 5% high year-on-year at ₹155,580 crore. However, O2C EBITDA fell 24% to ₹12,413 crore. O2C includes refineries that produce auto fuels and downstream products like polymers. This was the second straight quarter that Ebitda contribution from the segment lagged digital services, which includes Jio.

The company’s oil and gas business, which includes exploration and production of fossil fuels, reported a 6% year-on-year dip in revenues to ₹6,222 crore, but an 11% growth in Ebitda contribution to ₹5,290 crore.

“Weaker margins on the refining business seem to have been largely offset by reassuring growth trends in the digital, telecom and retail facets of the business,” said Nirav Karkera, head of research at Fisdom, a wealth management platform.

“While this time around, the petro-businesses seemed to have succumbed to headwinds from global factors, the trend of relatively new-age business segments offsetting challenges faced by the conventional ones is somewhat a trend that has been emerging over the past couple of quarters," Karkera said. 

"One highlight is the progress being made on the new energy giga-factories front, where there is now increased visibility on production timelines. The new energy business seems to be making some solid headway and transforming from an aspirational agenda to a more tangible execution roadmap,” he added.

Also read | RIL aims to be green energy leader, boost retail and Jio investments

Tariff hikes bump up Jio

Reliance Jio Platforms, which operates the country’s largest telecom provider by revenue and subscribers, reported an 18% growth in revenue to ₹31,709 crore. Ebitda improved 18% to ₹15,931 crore, while profit grew 23% to ₹6,539 crore.

The business was helped by a hike in tariffs by the carrier in the first week of the quarter.

Subsequently, average revenue per user (Arpu), a key metric in the telecom sector, improved 7% on-year to ₹195.1.

However, Jio’s customer base declined by over 2% during the quarter to just under 479 million.

Reliance’s consumer retail business, which includes Reliance Smart, Reliance Digital and Trends stores, reported stable numbers. Revenue declined 1% year-on-year to ₹76,302 crore but profit grew by 1% to ₹2,836 crore over this period.

“Reliance Retail continues to make investments in technology and infrastructure to build a strong foundation for future growth and maintain market leadership,” said Isha Ambani, executive director, Reliance Retail Ventures Ltd.

“We continue to strengthen our customer proposition with innovative products that spans everyday essentials to premium offerings. By continuously enhancing our assortment and innovating across categories, we are creating a shopping experience that meets the evolving needs of our customers and reinforces our leadership in the retail space,” she said.

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