The numbers were on the expected lines, but a sharp drop in revenue from petchem business, drop in gross refining margin, a major hit on the proven cash generator oil & gas and retail business raises worry for the company. Revenue from the media business, too, shrank quite a bit.
Analysts said the bottomline was also driven by a lower tax rate, even if one were to exclude the other income part.
How much did the company earn?
RIL reported a 31 per cent year-on-year (YoY) rise in consolidated net profit at Rs 13,233 crore for the quarter ended June 30, thanks to a sharp jump in other income at Rs 4,388 crore.
- Profit in its telecom arm Jio jumped nearly three-fold to Rs 2,520 crore, as data usage spiked and average revenue per user improved due to tariff hike.
- Ebitda of its retail arm fell by half to Rs 1,083 crore due to Covid-19 restrictions during the quarter
- Refining and marketing business’ revenue declined 54.10 per cent YoY to Rs 46,642 crore. Ebitda slipped 25.80 per cent YoY to Rs 3,818 crore.
- The topline from oil and gas business fell 45.2 per cent YoY to Rs 506 crore; Ebitda turned negative at Rs 32 crore from Rs 207 crore YoY.
- Revenue from the media business declined 35.20 per cent YoY to Rs 807 crore due to the Covid-19 clampdown; Ebitda declined 41.30 per cent YoY to Rs 27 crore.
What is that one-time gain?
The company said the exceptional gain of Rs 4,966 crore (net of taxes of Rs 1,508 crore) came from profit on divestment of shares of Reliance BP Mobility Services. RIL sold 49 per cent of its fuel retailing business to BP for Rs 7,629 crore, which translated into the above-mentioned gain.
How did Jio grow during the quarter?
Jio was the outperformer among all business verticals. It added 15.1 gross subscribers despite restrictions across the country. “Customer engagement increased during the quarter with national lockdown driving average wireless data consumption per user per month to 12.1 GB and average voice consumption to 756 minutes per user per month,” the company said.
What with its retail business?
Reliance Retail suffered badly due to the store closure during the lockdown. “Store functioning and digital commerce fulfilment was severely impacted by lockdown and restrictions (50% stores were fully shut, 29% partially operated). The performance whilst muted by the operating context, was well ahead of market,” RIL said.
The company insisted that Ebitda was positive and resilient despite the limitations in the quarter.
What does the management say?
“Severe demand destruction due to global lockdowns impacted the hydrocarbons business, but the flexibility in operations enabled us to operate at near normal levels and deliver industry leading results. The consumer-facing businesses became the life-line for individuals and businesses, with Retail and Jio teams working hard to ensure millions got essential goods and services through the lockdown,” said Mukesh Ambani, Chairman and Managing Director.
What do analysts say?
Abhijeet Bora, Sharekhan: On operating level, the results were in line with estimates. Both GRM and petchem Ebit margins were in-line. The refinery throughput and petchem production was strong because given the lockdown, I think they have been able to export more and done a good job. Jio ebitda that has grown almost 17 per cent QoQ is in line with Street expectations but retail Ebitda is slightly lower. We know there has been pressure except for grocery business. Jio Arpu increased to Rs 140.30, a 7 per cent qoq gain, which was expected. Overall, operationally, I am satisfied but on the bottomline was driven by lower tax rate, even after we exclude the other income.
Mayuresh Joshi, William O’Neil: RIL’s Q1 results came in line with expectation. Core petchem business and refining were supposed to remain soft due to lockdown. However, petchem margins came in better than expectations. GRMs were far better in a tough environment. Jio came as a surprising element on Arpu and subscriber front. Global development may give direction to RIL shares in the near term, but the long-term story stays intact as the value unlocking exercise is still happening on the counter.
Deepak Jasani, HDFC Securities: RIL’s reported revenues were short of estimates, mainly due to poor topline performance by refining segment. Adjusted PAT came in marginally higher than estimates, helped in part by higher other income and lower tax.Both refining and petchem businesses performed well at the operating profit level due to optimised crude procurement, relatively higher utilisation, cost management and agile product placement. Reliance Retail’s topline performance was resilient in an adverse operating environment. Reliance Jio’s performance was broadly in line, but the Apru at Rs 140 surprised positively.