Reliance Industries Q2 results update
Last updated: 31 Oct, 2020 | 11:01 am
Consumer segments help beat estimates in bottomline: Reliance Industries net profit (before exceptional items) rose 28% on-quarter to ₹10,602 crore in Q2FY21, beating analyst estimates, mainly due to strong performance by Consumer segments (Reliance Jio and Reliance Retail). Analysts had earlier estimated a profit of about ₹8,134 crore.
Revenues rebound across segments: Reliance’s revenue grew 27.2% on-quarter to ₹1.28 lakh crore, aided by a rebound across segments. Revenue from the refining business grew 33%% on-quarter ₹62,154 crore. Revenue from petchem business grew 17.8% from Q1 to Rs 29,665 crore. Gross Refining Margin- which signifies how much Reliance Industries earns for refining one barrel of crude- has fallen to just $5.7 per barrel, from a high of $12 per barrel in Sep-2017. This segment has severely hurt profitability in the quarter, mainly due to severe demand destruction due to the lockdown-induced curbs in business activity. While some of the demand is getting back as the economy opens up, the margins are yet to recover for this segment.
This segment has severely hurt profitability in the quarter, mainly due to severe demand destruction due to the lockdown-induced curbs in business activity. While some of the demand is getting back as the economy opens up, the margins are yet to recover for this segment.
Margins improve: RIL’s EBITDA margin improved to 43.1% from 42.5% in the previous quarter. This was due to a strong show by Retail and Jio. Consumer Businesses EBITDA was up 16.5% QoQ. Consumer businesses now contribute 49.6% of consolidated business segment EBITDA. The quarter saw record quarterly EBITDA for Digital Services. Consolidated EBITDA rose 7.9% QoQ to ₹23,299 crore. Strong revival in was seen in O2C earnings with rebound in petchem and oil product demand.
Reliance Jio shines: Reliance Jio saw another robust performance in the quarter, led by higher subscriber addition and tariff hikes. Reliance Jio’s Revenue from Operations rose 7.2% over the previous quarter to ₹18,496 crore. Reliance Jio became the first mobile service provider to cross 40-crore customer mark in India in July, with net addition of over 35 lakh subscribers. Jio now commands a market share of 35.03% market share in India’s mobile market. Profit rose to Rs 2,844 crore in the quarter from Rs 990 crore a year ago and Rs 2,520 crore in the preceding quarter. Reliance Jio’s ARPU also expanded to ₹145 in the quarter. This is Jio's 12th consecutive quarter where it has posted a profit.
Jio holds the key to Reliance Industries’ transition from an Oil business to a Data Business.
Reliance Retail resilient: The lockdown in various states has significantly disrupted the retail business in the previous quarter. Reliance Retail saw some bounce-back in the quarter. Retail segment’s revenue increased 30% QoQ to ₹41,100 crore, while its EBITDA jumped 86% to ₹2,006 crore. RIL said that store footfalls are still significantly lower than pre-Covid levels; with 15% stores still closed. The company expects this to normalise in Q3.
- Reliance Retail Ventures Limited (RRVL), a wholly owned subsidiary of Reliance Industries Limited, raised Rs 37,710 crore of investments from leading global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG, and ADIA. This comes after RIL had raised over ₹1.5 lakh crore in the last few months.
- The consumer electronics and fashion retail operations were suspended fully in April and partially in May and June. These segments have seen a very strong rebound, providing a boost to earnings of Reliance Retail. Consumer Electronics delivered a strong performance with revenues at 2x over previous quarter, and notably double-digit growth over the previous year, despite lower footfalls.
The growth in Cosumer Businesses (Reliance Retail and Reliance Jio) have cushioned lower revenues in Oil & Gas segment. The company is confident that activity will return to pre-Covid levels in its Retail segment by the end of Q3. Domestic demand has sharply recovered across RIL’s O2C business and is now near pre-Covid level for most products. Even the Oil and Gas business has seen operational improvement in the qtr, due to improving market conditions.
As it stands today, the future growth and the roadmap of the company is oriented towards its consumer businesses (Reliance Retail, Jio and Jio Platforms). These high growth areas have driven the valuations in the stock and will continue to do so as we get close to the inevitable demerger of Reliance Industries.