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Reliance Q2 Earnings Below Estimates, Jio Surprises

Reliance Industries Ltd. reported less-than-expected profit in the July-September quarter as its refining margin lagged estimates.

Standalone net profit rose 0.84 percent over the previous three months to Rs 8,265 crore, according to a media statement. The Bloomberg consensus of analyst estimates had pegged profit at Rs 8,665 crore. Revenue net of excise duty went up 6.7 percent to Rs 68,532 crore.

Operating income rose 12 percent sequentially to Rs 12,983 crore. Operating margin expanded 80 basis points to 18.8 percent.

Reliance Industries’ gross refining margin, or what it makes on refining every barrel of crude, increased to $12, the highest in nine years. That’s lower than the estimated $12.5 per barrel. The premium that Reliance commands over the Asian benchmark Singapore gross refining margins also narrowed to $3.7 from $5.5 in the previous quarter.

A marginal miss on the refining margin should not be seen as a negative, according to Gaurang Shah of Geojit Financial Services. It’s not a matter of concern as oil prices are likely to stay at a lower level as there is no demand-supply mismatch, Shah told BloombergQuint over the phone.

Reliance reported its best-ever operational performance in its mainstay refining and petrochemical business. That was on account of "higher volumes, better margin environment and operational excellence", according chief financial officer Alok Agarwal.

Mukesh Ambani, Chairman And Managing Director, RIL The results also reflect strong underlying fundamentals of our refining and petrochemicals businesses. 

Petrochemicals Business

Revenue from the petrochemicals business rose 10 percent sequentially to Rs 27,999 crore. Petrochemicals margins expanded by 190 basis points to 17.7 percent, the highest in the last 10 years.

The petrochemicals business also recorded the highest ever earnings before interest and tax of Rs 4,960 crore, led by volume growth.

Production increased to 7.5 million metric tonnes from 6.5 million metric tonnes in the previous quarter.

Retail Business

The organised retail revenue grew 27 percent over the previous quarter to Rs 14,646 crore. That was driven by a growth in digital, fashion and lifestyle and petroleum products.

The retail business is still too small to make a meaningful difference. The exploration and production business, too, does not move the needle.

Jio’s Positive Suprise

The company’s telecom arm Reliance Jio Infocomm Ltd. reported a loss at Rs 271 crore for the July-September quarter but still managed to deliver a positive surprise. It’s the first time Reliance has disclosed earnings for the business.

Despite being the latest entrant in India’s crowded mobile-phone market, Jio added 15.3 million net subscribers during the quarter, taking the total subscriber base to 138.6 million. The operator offered free services for the first seven months of operations and undercut prices severely after it started charging customers since April this year. The average revenue per minute was strong at Rs 156.4 per user a month.

Jio had a positive EBIT contribution in its first quarter of commercial operations, RIL’s Chairman and Managing Director Mukesh Ambani said in a media statement.

Mukesh Ambani, Chairman and Managing Director, RIL The strong financial results of Jio demonstrates the robust business model of Jio and the significant efficiencies that the company has built through its investment in the latest 4G technology and right business strategy. 

Also Read: Reliance Jio Posts Strong Revenue Per User

Other Highlights From Reliance Jio

  • Standalone EBITDA: Rs 1,443 crore
  • EBITDA margin: 23.5 percent
  • Jio customer churn at 1 percent per month, expected to reduce further

. Read more on Markets by BloombergQuint.