Home >Markets >Mark To Market >Resilient show by O2C biz, Jio keeps outlook firm for Reliance

Reliance Industries Ltd's June-quarter performance was well supported by its digital services and oil-to-chemicals (O2C) business, although the retail business was impacted by regional lockdowns.

The O2C business reported sequential growth of 7% in Ebitda, despite the impact of the second covid wave. This was the fourth straight quarter of growth after the first wave.

Though domestic demand for fuel and downstream chemicals was hit by lockdowns, operating performance was helped by firm petrochemical margins and improving refining margins. The domestic volume decline in petrochemicals was significantly compensated by exports.

Firm trajectory
View Full Image
Firm trajectory

“The O2C segment was relatively resilient and segment Ebitda further increased. Apart from higher volumes (throughput up 2% sequentially), we estimate that refining margins would also be marginally better," said analysts at Nomura Global Equity Research in a post-results note.

In the digital services business, the total customer base of 440.6 million as of June meant that there was a net addition of 14.3 million customers in Q1. The company also managed to maintain a stable average revenue per user (Arpu) of 138.

“Despite the impact of the second covid wave, Reliance Jio held its ground after the push from the JioPhone launch in Q4FY21," said analysts at Motilal Oswal Financial Services Ltd.

Analysts remain positive on forward prospects for the digital services business. “With continued market share gains, fiber-to-the-home/enterprise ramp-up, strategic tie-ups, in-house 5G capabilities, increased spectrum footprint and digital ecosystem roll-out, the outlook remains strong," said analysts at Nomura.

The retail business, however, did feel the heat of the pandemic, impacting footfall and hence revenue at stores. Footfall was 46% of pre-covid levels. Though grocery sales were firm, they could not prevent a 46.1% sequential decline in the segment’s Ebitda.

Nevertheless, rising e-commerce activities bode well. JioMart (grocery + horizontal) saw a 25% sequential increase in the number of orders with 75% repeat orders and has expanded to 218 cities, point out analysts. Kirana partnerships increased 33% sequentially. Reliance Digital (electronics) clocked its best-ever quarter and an improvement in metrics, said analysts at JP Morgan Asia Pacific Equity Research in their report.

Investors will look forward to the launch of the low-cost 4G smartphone in September, which is expected to help accelerate the growth of Jio’s subscriber base.

The finalization of deal terms with Saudi Aramco for the O2C segment could be another trigger for the stock.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Edit Profile
My ReadsRedeem a Gift CardLogout