(Bloomberg) — Reliance Industries Ltd., India’s biggest company by market value, posted a lower-than-expected quarterly profit as higher tax liabilities and surging input costs offset gains made from fuel exports amid the Russia-Ukraine war.
Net income at the billionaire Mukesh Ambani-led conglomerate rose 22% to 162 billion rupees ($2.1 billion) in the three months ended March 31, according to an exchange filing Friday. But that still fell short of the average 168.2 billion rupee profit estimated by a Bloomberg survey of analysts.
Revenue surged 37% to 2.12 trillion rupees compared to the same period last year, narrowly missing the analyst estimates. Total costs jumped 34% to 1.92 trillion rupees, lifted by a 69% rise in raw material prices. The company announced a dividend of 8 rupees per share, the filing said.
Key Insights
- Reliance’s quarterly earnings missed expectations despite all its businesses doing reasonably well. Overall, its annual revenue rose past the $100 billion-mark, a first by an Indian corporate.
- The single biggest headwind for Reliance in the local market is the threat from surging inflation. These could well eat into Indian consumers’ purchasing power besides crimping margins at its retail business. Global geopolitical uncertainty and the constant supply chain disruptions seen in the past few years will be another big risk for Ambani’s conglomerate.
- The company made a deferred tax liability of 88.5 billion rupees as against 7.8 billion a year earlier.
- Its refinery in Jamnagar — the world’s biggest refining complex — stepped up exports to benefit from the surging demand as Russia’s invasion of Ukraine spurred a global energy crunch that pushed up international prices.
- Ambani will have to balance his fossil fuel-led businesses and his green energy ambitions for which he has committed $76 billion investment.
- Self-sanctions by some European Union companies amid the Ukraine conflict is supporting high energy prices and pushing up fuel margins to multi-quarter highs, Joint Chief Financial Officer V. Srikanth told an earnings call
- Reliance Jio Infocomm Ltd. saw improved average-revenue-per-user as the March quarter saw the full benefit of December’s tariff hikes flowing. ARPU jumped to 167.60 rupees, according to the company’s statement. The subscriber base has also shrunk amid an ongoing clean up of inactive users at Jio.
- Investors are keenly watching Jio’s 5G rollout plans as well as how much spectrum India’s top operator is able to secure and at what price during the government auction this year.
- The lifting of pandemic curbs and a full-scale reopening of the economy during the March quarter boosted Reliance’s consumer retail business. It transferred leases of hundreds of outlets under Future Retail Ltd. and Future Lifestyle Fashions Ltd. in a bloodless coup of sorts. Reliance also scrapped the transaction with the Future Group in April after the deal was rejected by the secured lenders.
- Reliance is now also gearing up for an all-out face off with Amazon.com Inc., The Walt Disney Co. and Sony Group Corp as the media giants clash to win the broadcast rights of Indian Premier League — a coveted cricket tournament that’s expected to draw bids exceeding $5 billion.
- After receiving almost $27 billion investment into Reliance’s Jio and retail units, investors are waiting for any management steer on a possible listing of these units, which a media report said may come as early as during Reliance’s shareholder meet this year.
- Ambani had also spoken about a leadership succession in December, accelerating the process of his children — Isha, Akash and Anant — taking over various Reliance businesses.
Market Reaction
- Shares of Reliance have surged 11% this year, touching a record high last month. Benchmark S&P BSE Sensex by comparison has slipped 6% in 2021.
- Earnings were announced after the close of India market hours.
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- Reliance Jio reported a 24% jump in profit to 41.73 billion rupees. Subscriber base shrank to 410.2 million users as of end-March
- Reliance Retail unit saw a quarterly profit of 21.4 billion rupees: filing
- Total debt, as of March. 31, stood at 2.66 trillion rupees while cash equivalents were at 2.31 trillion rupees
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