RIL Q3 Results: Net profit misses estimates on windfall tax, PAT surges QoQ

Reliance's shares closed 1.15% lower in Mumbai ahead of the earnings announcement today. The company'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.

Reliance Industries has reported a bigger-than-expected drop in quarterly profit as the company took a hit from the government's windfall tax on fuel exports. The taxes were levied on exports of gasoline, diesel and aviation fuels midway last year, halting the momentum in Reliance's O2C business built on cheap Russian crude and high demand for transportation fuels.

Prabhudas Lilladher - Reiterate BUY, with PT of ₹2,894.

Abhijeet Bora, DVP, Research at Sharekhan by BNP Paribhas - We have Buy rating on RIL.

Mukesh 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.

Analysts are also waiting for more details on Reliance Industries Ltd'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.

“The earnings growth of Reliance’s retail segment could stay solid, propelled by a sustained increase in store expansion and e-commerce,” Bloomberg Intelligence analyst Henik Fung said in a 18 January note. “Jio’s growth could also be driven by subscriber and ARPU growth.”

The muted earnings come at a time when Reliance is in the midst of a transformation as Ambani focuses on pivoting his fossil fuel-fed empire toward green energy – an initiative for which he has committed $75 billion of investment.

Mukesh Ambani said, "We are making rapid progress towards implementation of new energy Giga factories at Jamnagar as part of our commitment to revolutionizing the green energy sector. Our strong balance sheet and robust cash flows remains the cornerstone of our commitment in growing existing businesses as well as investing in new opportunities.”

Downstream chemical products experienced margin pressure due to excess supply and relatively weak regional demand, Reliance said in a statement.

With a workforce base of more than 418,000 job creation and reskilling of people remained a cornerstone of Reliance Retail’s mission of inclusive growth.

The business expanded its physical store network with 789 new store openings totaling to an area of 6 million Sq. ft.

Within three months of launch, Jio True5G is available across 134 cities and would be available across the country by December this year. In addition, Jio will connect over 100 million premises with JioFiber and JioAirFiber offering unparalleled digital experiences.

Ambani said, "Jio is undertaking the most ambitious and fastest ever 5G rollout plan for any country of our size. We will also empower small merchants and businesses with cutting-edge, plug-and-play solutions delivered from the cloud.”

- Net subscriber addition was 5.3 million as gross adds remained strong at 34.2 million in Q3 FY23.

- ARPU increased sequentially due to better subscriber mix.

Reliance has reported a bigger-than-expected drop in quarterly profit, hurt by higher expenses and subdued performance at its key oil-to-chemicals business.

Outstanding debt as on 31 December, 2022 was ₹303,530 crore, whereas cash and cash equivalents as on 31 December, 2022 were at ₹193,282 crore, RIL said in an exchange filing.

In O2C business, middle distillate product fundamentals remain strong with firm demand, constrained supply, and high natural gas prices in Europe. Downstream chemical products witnessed margin pressure with excess supply and relatively weak regional demand. Our focus remains on operating safely and reliably producing vital fuel and materials for consumers, Ambani said.

“Jio delivered record revenues and EBITDA driven by strong momentum in customer growth and data consumption. This quarter we launched True 5G services. It is now available in 134 cities and towns in India, enhancing customer experience while enabling next generation services. It is heartening that customers recognise the great value and world class connectivity that Jio offers on its 4G and 5G networks.”

On retail, he said: "Retail business had another quarter of strong progress with more Indians choosing to shop at Reliance Retail stores. We are focused on delivering superior products and value to customers while improving profitability.

"Our teams across businesses have done an excellent job in delivering strong operating performance through a challenging environment. All segments contributed to the robust growth in consolidated EBITDA on Y-o-Y basis."

Reliance Retail has reported a 6.2% jump in consolidated net profit for the December quarter to ₹2,400 crore. The Mukesh Ambani-led retail chain's gross quarterly revenue for the third quarter was up by 17.1% to ₹67,634 crore, from ₹57,717 core in the corresponding quarter last fiscal. Reliance Retail's posted a EBITDA which shot up by 24.7% YoY to ₹4,786 crore.

Reliance's board of directors on Friday approved fundraising to the tune of ₹20,000 crore through non-convertible debentures. These NCDs will be issued in one or more tranches and on a private placement basis.

RIL's consolidated EBITDA came in at ₹38,460 crore, up 13.5% on-year.

According to an average estimate by Bloomberg, Reliance net profit was seen at ₹16,037 crore and the revenue was pegged at ₹1.75 lakh crore.

The oil-retail-telecom conglomerate's revenue from operations rose 15% to ₹2.20 lakh crore for the reporting quarter as compared to ₹1.91 lakh crore in the same period last year.

Asia's richest man Mukesh Ambani-led Reliance Industries Ltd today posted a consolidated net profit of ₹15,792 crore for the quarter ended 31 December, 2022 (Q3FY23). This is 14.8% lower from ₹18,549 crore reported in the year-ago period.

In a report, ICICI Securities said: “RIL is likely to see a steady improvement across segments, with stronger base GRMs and relatively lower windfall tax to drive better OTC results. However, a ~15% dip in integrated petrochemical spreads will likely offset the refining boost to an extent. Jio is expected to deliver a 2% QoQ rise in EBITDA while retail too is likely to have sustained the momentum, with an estimated 4% jump in QoQ in segment EBITDA. Overall, we expect consolidated EBITDA to grow by 5% QoQ and PAT by 6% QoQ.”

UBS sees RIL's consolidated profit at tax for the December quarter at ₹15,100 crore, down 4% YoY, but up 10% sequentially.

In a note earlier, Nomura had said: "We estimate RIL's Q3FY23 consolidated EBITDA to grow 10% sequentially, driven by a recovery for the O2C (oil-to-chemical) segment on a low base, strong uptick for upstream and sustained growth across consumer-facing businesses.”

The oil-to-telecom major is expected to report a 5% decline in its net profit. RIL will log 4.8% dip in profit at ₹14,965 crore on a 12.5% on-year rise in sales at ₹2,08,132 crore, says Nuvama Institutional Equities.

The volatility in the stock ahead of RIL's earnings has been far lesser than that seen post earnings. On Thursday, the stock ended 0.2% down at ₹2,469 on the NSE. The stock hit a 52-week high of ₹2,855 on April 29, 2022 and 52-week low of ₹2,181 on March 8, 2022.

Global investment bank JPMorgan had said that the sequential growth in RIL earnings will be largely driven by the oil-to-chemicals (O2C) business due to the benefits from the removal of SEZ export tax and the E&P business, as higher prices flow through from October 2022.

In a note earlier, JPMorgan said, “The projected PAT growth is lower than EBITDA growth as interest costs should increase given weaker INR and higher E&P (exploration & production) related depreciation.”

With an improvement in footfalls during the festive season and the benefits of operating leverage, Reliance Retail will continue its strong growth show, analysts believe. The launch of Reliance Retail's FMCG (fast moving consumer goods) brand Independence and the acquisition of Metro Cash and Carry were the two key announcements made on the retail front last quarter.

Operating profit margin for the December quarter improved to 26.6% as against 26.3% in September 2022 and 26.1% in the year-ago period. Net profit margin came in at 17.1% as compared to 17% in September 2022 and 26.1% in the corresponding quarter last year.

Jio posted a net profit of ₹4,638 crore in Q3FY23. On a sequential basis, the net profit was up by 2.65%, from ₹4,518 crore in the September quarter. Jio's revenue from operations inflated to ₹22,998 crore in December quarter from ₹19,347 YoY, a rise of 18.87%.

Prabhudas Lilladher expects the company to report a profit after tax (PAT) of ₹94,282 crore - a growth of 12.8% year-on-year - on sales of ₹13,24,585 crore - an year-on-year growth of 7.3%.

Sharekhan by BNP Paribas expects the third quarter consolidated profit after tax to come in at ₹17,316 crore on sales of ₹2,21,949 crore - a 20% jump year-on-year, but a 3.5% fall on a sequential basis. It expects operating margins for the said quarter to come in at 15.7%.

- PAT at ₹4,638 cr

-Revenue at ₹22,998 cr

- EBITDA at ₹12,009 cr

- Margins at 52.2 %

Jio reports earnings in-line with estimates. The sector's revenue soared 3% QoQ and margin came in at over 52%. Full report here

Reliance Jio reports a net profit of ₹4,638 crore for the third quarter (October-December).

Reliance Industries is expected to report double-digit growth in consolidated revenue and EBITDA or earnings before interest, taxes, depreciation and amortisation for the October-December quarter.

Ahead of its earnings announcement, RIL shares closed 1.15% lower at ₹2,442.70 apiece on the BSE.

Nifty heavyweight Reliance Industries Ltd's results for the third quarter are expected to be better than the September (Q2) numbers due to an improvement in the mainstay energy business, coupled with steady performance of the telecom and retail verticals.

RIL is scheduled to release its third (October to December) quarter results for the current financial year on Friday, 20 January 2023, post market hours.