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Shares of Reliance Industries Ltd (RIL) on Monday slumped nearly 5% as the company's earnings for the third quarter ended 31 December 2020 fell short of estimates on several fronts. The scrip touched a low of 1,953.30 apiece on the BSE, down as much as 4.69% from its previous close.

According to analysts, weak oil to chemical operations, lower net additions from Jio and fall in retail revenues sequentially, weighed down the RIL stock.

At 10.52am, shares traded at 1,964.95, down 4.13% from its previous close, while the benchmark Sensex was little changed at 48,915.97.

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Mukesh Ambani-led RIL on Friday posted a consolidated net profit of 14,894 crore, up 25.8% for the December quarter, beating analysts’ estimates. However, RIL's consolidated revenue declined 18.6% from 1.69 trillion a year ago to 1.38 trillion, while earnings before interest, tax, depreciation and amortization (Ebitda) remained little changed at 26,094 crore.

"We continue to like RIL shares but believe the near term weakness should continue until we see economics of the O2C (oil-to-chemical) business improve", said Brokerage firm BNP Paribas in its note.

Segment EBIT for OTC segment of 7,600 crore, down 32% year on year highlighting the weaker demand scenario specifically for refined products. The weakness is visible in key product spreads with Gasoline spreads of $4.3/bbl down $11/bbl year on year and gasoline spreads of $3/bbl down $5.2/bbl.

Brokerage firm BNP Paribas says that they are not able to analyse the standalone business at a granular level as RIL has started to club its entire O2C operations under one head from 3QFY21 onwards - it no longer reports GRM and segmental EBITDA.

Retail revenue fell about 9.7% sequentially to 33,018 crore due to continued challenges with sporadic covid related restrictions and local issues.

Net subscriber addition of Jio was on a lower side at 5.2 million, lowest ever in a quarter against the analyst expectation of 9 million addition. The company highlighted weak additions was due to continued impact of covid and campaigns against Reliance in some areas.

Brokerage firm Goldman Sachs expects the growth in telecom segments to accelerate over the near term. It further notes that the management highlighted multiple product launches in upcoming quarters around IOT and SMB bundles which together with likely android phone launch with Google can help sustain sequential growth.

"We believe JIO and the retail businesses will continue its strong growth momentum over FY20-22E while OTC segment will see some pressure over the next 12M and given the demand weakness and limited evidence of IMO impacting diesel spreads favourably, we see this segment remaining below historical levels over the next 12-18Mths", said Centrum Institutional Research in a note to its investors.

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