Mumbai: Reliance Industries Ltd (RIL) on Thursday reported a 22.89% drop in its September quarter consolidated net profit to Rs7,206 crore in the absence of one-off income that boosted earnings in the year-ago period.
A record profit at its petrochemical business and continued strong showing in the refining segment will allow it to continue investing in its newly-launched telecom venture.
On Thursday, RIL said it will spend an additional Rs1 trillion on Reliance Jio Infocomm Ltd by 2020, taking its total investment in the venture to Rs2.5 trillion.
In the same quarter of 2015, RIL posted a one-time gain from the sale of a US subsidiary (adjusted for impairment in some assets) of Rs4,310 crore. Adjusted for this one-time gain, RIL’s September-quarter net profit rose 43.1%. Its consolidated revenue rose 14.3% from a year ago to Rs81,651 crore.
The company had been expected to post a consolidated net profit of Rs7,282.5 crore on a revenue of Rs63,669.9 crore, based on a Bloomberg poll of six analysts.
The company’s core petrochemical and refining business continued to generate profits as it processed more volumes even as the gross refining margin slipped marginally.
The refining segment accounts for over 65% of profit and 70% of revenue for the operator of the world’s biggest oil-refinery complex, with a refining capacity of 1.24 million barrels of oil per day, at Jamnagar in Gujarat.
RIL’s stand-alone profit in the September quarter was Rs7,704 crore, up 18% from a year ago.
Revenues from the refining segment declined 0.4% from a year ago, but earnings before interest and taxes (Ebit) rose 9.7%. RIL processed 18 million metric tonnes of crude in July to September, 5% more than a year ago.
The firm reported a gross refining margin (GRM) of $10.1 in the just-ended quarter, compared with $10.6 per barrel a year ago and $11.5 in the June quarter. GRM is the difference between the per-barrel price of crude and the value of products distilled from it.
Revenue from the petrochemicals segment rose 5.6% from a year ago to Rs22,422 crore, primarily due to an increase in sales volumes of fiber intermediates and polyester products. This segment’s Ebit rose 35.5% from a year ago to a record Rs3,417 crore, the company said in a note. Robust demand growth in polyester and polymer products and a firm margin underpinned earnings in this segment.
The petrochemical segment recorded an Ebit margin of 15.2% in the September quarter, about 3.3 percentage points higher than a year ago.
“While the petrochemicals business has done well because of stable margins and higher volumes, the future driver will be the telecom venture,” Dhaval Joshi, an analyst at Mumbai-based Emkay Global Financial Services Ltd, told Bloomberg. “The stock’s big movement hereon depends on how quickly telecom operations turn around.”
The telecom operation is the key area of interest, given the company’s commitment of Rs2.5 trillion in investment. “This (additional Rs1 trillion investment) will come in terms of furthering our own fibre optics footprints and fibre-to-home,” said V. Srikanth, joint chief financial officer, RIL.
Reliance Jio added 16 million customers in its first month of operations after launching the mobile service in September, it said. It is now adding about 500,000 subscribers every day, Anshuman Thakur, Reliance Jio’s head of strategy and planning, told reporters.
RIL said the welcome offer of free services Jio launched on 5 September will end on 3 December but the benefits of free data and calls will continue till 31 December.
According to Telecom Regulatory Authority of India guidelines, a promotional offer cannot exceed 90 days, prompting Jio to end the welcome offer by 3 December.
RIL’s retail business, meanwhile, posted a 63% increase in revenue, led by growth in sales of digital, fashion and lifestyle, and petroleum products.
Ahead of its earnings announcement, RIL shares closed at Rs1,088.35, up 0.1% on BSE, while the benchmark Sensex gained 0.52% to close at 28,129.84 on Thursday.
The company restated year-ago quarter profit as it moved to the new Ind-AS accounting standard.
Bloomberg contributed to this story.