Mumbai: Reliance Industries Ltd’s (RIL’s) shares have beaten the market by a wide margin in the past two months on expectations of a regulatory boost for its refining business and excitement about revenue accretion from its telecom subsidiary’s non-mobile businesses.

While those outcomes will take some time to materialize, the company has some good news for investors in the interim. It beat the Street by a handsome margin in the June quarter, reporting an operating profit of 20,661 crore. On an average, analysts had estimated profit of 18,280 crore, according to Bloomberg.

The outperformance was led by the petrochemicals segment, which reported a 35% year-on-year jump in volumes, helped by the company’s expanded capacity. Petchem realizations were up 24%. The upshot— petchem Ebit (earnings before interest and taxes) rose 95% year-on-year to 7,857 crore. The performance of the refining segment was subdued, but more or less in line with expectations. RIL’s gross refining margin last quarter stood at $10.5/barrel, more or less in the range that analysts had anticipated, based on the decline in Singapore refining margins.

Of course, much of the excitement around RIL these days is over its telecom subsidiary, Reliance Jio Infocomm Ltd. It didn’t disappoint. Surprisingly, it reported a mere 2% or so decline in average revenue per user (Arpu), despite waiving off prime membership fees since April, and also taking a hit on account of discounts offered for some modes of payment.

As a result, most of the increase in Jio’s subscriber base ended up as commensurate growth in revenue. They grew nearly 14% quarter-on-quarter to 9,567 crore. Analysts at Jefferies India Pvt. Ltd had estimated that a close to 10% drop in Arpu will offset the increase in subscribers.

Jio’s Ebit grew at a similar pace to 1,708 crore. Along with the retail business, the company’s consumer businesses now account for over a fifth of its operating profit. It’s important to note that the retail subsidiary’s margins rose quarter-on-quarter, which should allay concerns that the spike in margins in the March quarter was a one-off.

Coming back to Jio, the company’s capex in the June quarter stood at 17,000 crore, higher than the 14,000 crore it spent in the March quarter. As such, cash burn remains exceptionally high.

According to an analyst at a domestic institutional brokerage firm, Jio appears to be going for the kill, by increasing its lead over incumbents significantly in terms of network coverage. Idea Cellular Ltd and Vodafone India Ltd are already losing subscribers, without the ability to keep up with investments.

In this scenario, it may not be totally off the mark to expect Jio to steadily increase its market share to its targeted level of 50%. The company’s progress so far will please investors. Whether it will make a decent return on its huge investments is another matter.

As far as the RIL stock goes, the results can be expected to sustain investor interest. A fair share of optimism lately has been due to the expected increase in refining margins under the new rules issued in October 2016 by the International Maritime Organization. The limit for sulphur content in fuel oil used by ships has been set at 0.5% from 1 January 2020— as against 3.5% at present. This is expected to boost demand for low sulphur diesel/middle distillates globally, which in turn would lead to an increase in product cracks. Complex refiners such as RIL are expected to benefit from this.

Whether this materializes or not, the progress of the Jio project, coupled with expectations surrounding non-mobile businesses such as home broadband, is likely to keep investors excited.

The writers do not have any positions in the companies mentioned above.

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