Reliance Industries Ltd (RIL), India's largest private-sector enterprise, is expected to report strong earnings in the September quarter on the back of a recovery in refining margins which is likely to offset weakness in petrochemicals, retail, and telecom operations.

Ten of the 14 analysts polled by Bloomberg expect RIL’s consolidated net profit to be 11256 crore. Nine analysts estimate the company’s revenue at Rs1.51 trillion.

Five leads to watch out for in RIL's second quarter earnings:

Omnichannel strategy and launch of new commerce

New commerce is Reliance Retail’s offline-to-online initiative, which would link producers, traders, small merchants, brands and consumers through technology. The company, the retail arm of Reliance Industries Ltd (RIL), has been working on its new commerce plan for nearly two years. Currently, it operates neighborhood stores, supermarkets, hypermarkets, wholesale, specialty and online stores. Reliance Retail aims to connect as many as 30 million neighborhood stores through the venture, Ambani said at the company’s annual general meeting on 12 August. The Street expects announcement on the plans shortly.

Revision in ARPU

Strong subscriber additions may aid growth at Reliance Jio Infocomm Ltd with analysts expecting Reliance Jio to add close to 2.4 crore subscribers in the quarter ended September. However, average revenue per user is expected to fall yet again as Jio adds more JioPhone subscribers who enroll at lower rentals, lured by cashback on digital recharges. Besides, now Jio customers with a prepaid mobile connection will have to choose between the IUC (Interconnect Usage Charges) and non-IUC top-up plans being offered by the company. Reliance Jio recently announced that it will be charging an additional 6 paise per minute for calls made by its users to any non-Jio mobile number.

Updates on the deal with Saudi Aramco

The Street would be keenly awaiting any updates on RIL’s deal with Saudi Arabian Oil Co, under which the oil-to-telecom company plans to sell a 20% stake in its flagship chemicals and refining business to Saudi Aramco in a deal valued at $15 billion. RIL seeks to cut its massive debt and also secure an assured supply of crude oil to its refineries through this deal.

Recovery in petrochemicals margin

Key petrochemical products, especially in the polyethylene (PE) chain, prices are at decadal lows. Paraxylene prices have also collapsed. The weakness is more pronounced in the PE chain. While oil prices are down, so is naphtha, spreads (based on naphtha) are down 10-20% on a quarter-on-quarter basis. Given the relentless wave of capacity addition across the petchem chain getting commissioned globally and weak demand outlook, JP Morgan analysts said they struggle to see a sharp recovery in petchem spreads anytime soon.

Outlook on refining margins

RIL is expected to report an increase in its gross refining margin (GRMs), which is what a refiner makes from turning every barrel of crude to fuel. Analysts expect RIL’s GRM to be at $9.5-10.5 per barrel during the quarter. The Singapore benchmark GRMs practically doubled quarter-on-quarter to $6.6 per barrel, backed by improvement in petrol, diesel, and aviation turbine fuel crack spreads. However, RIL’s premium to the benchmark is expected to be the lowest in 18 quarters, due to maintenance shutdowns during the quarter and lower production of petrol and fuel-oil. RIL produces more diesel. Margins have seen an uptick thanks to a reduced global refining activity during the quarter due to maintenance shutdown across regions. This was done to gear up for upcoming winter and demand stemming from the new International Maritime Organisation regulations.