Reliance Industries Ltd., helmed by billionaire Mukesh Ambani, posted a larger-than-expected quarterly profit as growth in its consumer units offset the weakness in its traditional petrochemicals business.
(Bloomberg) — Reliance Industries Ltd., helmed by billionaire Mukesh Ambani, posted a larger-than-expected quarterly profit as growth in its consumer units offset the weakness in its traditional petrochemicals business.
Net income fell 15% to 157.9 billion rupees ($1.9 billion) in the quarter ended Dec. 31 but was still higher than the average 156.19 billion rupees estimated in a Bloomberg survey. India’s largest company by market value also secured approval of its board to raise as much as 200 billion rupees via bonds.
Analysts had been penciling in a steeper drop in profit due to windfall taxes on fuel exports and as last year’s numbers were flattered by a one-off gain. Overall revenue did indeed come in weaker than consensus and costs surged but a strong showing at Ambani’s dominant telecom business helped blunt the impact.
“Reliance Industries witnessed strong growth momentum in consumer verticals,” Joint Chief Financial Officer V. Srikanth said in a post-earnings call Friday. “Retail growth was led by festive demand, strong momentum in e-commerce and continued store addition.”
Key Insights
- Reliance’s quarterly profit was eroded by 18.98 billion rupees due to a tax imposed on fuel exports against windfall gains made by refiners benefiting from the Russia-Ukraine conflict.
- Revenue at the retail-to-refining conglomerate rose 15% compared to the year-ago period but was slightly below expectations at 2.2 trillion rupees.
- Total costs surged 16% to 2 trillion rupees.
- The operator of the world’s largest refining complex at Jamnagar in Gujarat also saw a decline in petrochemical margins.
- “Downstream chemical products witnessed margin pressure with excess supply and relatively weak regional demand,” Chairman Ambani said in a statement.
- The muted earnings at the petrochemical division comes as Ambani is pivoting his fossil fuel-fed empire toward green energy — an initiative for which he has committed $75 billion of investment.
- Reliance Retail and Reliance Jio Infocomm Ltd. — both market leaders in their respective sectors — continue to propel the parent’s profit. Jio has begun launching 5G services in India.
- Analysts are also waiting for more details on Reliance’s plans to spin-off and list Jio Financial Services to feed its consumer businesses, an announcement that came through as part of the last quarterly earnings.
- Reliance announced in November that veteran banker, K.V. Kamath, will helm this new unit.
- Ambani is nearing the end of his succession planning. His elder son, Akash Ambani, was named the chairman of Reliance Jio last year, while the tycoon has asked his daughter, Isha Ambani, to helm the retail business and his younger son, Anant Ambani, to oversee the new energy vertical.
Market Reaction
- Reliance’s shares rose 7.13% in the December quarter, contributing to the almost 6% climb of the benchmark S&P BSE Sensex — a gauge it has the highest weightage in.
- The stock has slipped 4% this year.
- Earnings were announced after the close of market hours.
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- Reliance Jio’s net income jumped 28.3% to 46.38 billion rupees.
- It had 432.9 million users as of end-December, almost 3% higher from last year: filing.
- Reliance Retail revenue at 676.3 billion rupees, +17% y/y.
- Ebitda in 3Q at 47.73 billion rupees, +25% y/y.
- Total debt, as of Dec. 31, stood at 3.04 trillion rupees while cash and cash equivalents were at 1.93 trillion rupees.
–With assistance from Abhay Singh and Anirban Nag.
(Updates with comments from officials)
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