RIL reports 29.7% rise in Q2 net profit for FY 2023-24

Mumbai: Reliance Industries Ltd (RIL) on October 27 reported a consolidated net profit of Rs 19,878 crore in the second quarter of financial year 2023-24, an increase of 29.7 percent from a year ago, despite a dip in revenue from its oil-to-chemicals business. Robust performance of its retail, Jio and upstream businesses drove profit growth, the company said.

Gross revenue from operations of India’s most valued company stood at Rs 2.55 lakh crore in the quarter ended September 30, compared to Rs 2.52 lakh crore last year.

Net profit attributable to the owners of the company (profit after tax and minority interests) came in at Rs 17,394 crore in the quarter, compared to Rs 13,656 crore in the same period last year. A Moneycontrol’s survey had pegged net profit at Rs 17,482 crore, up 27.2 percent year on year. According to the Moneycontrol survey of 10 brokerages, the market expected RIL’s consolidated net sales to come in at Rs 2.31 lakh crore in Q2 FY24, up 0.5 percent year-on-year, and 11 percent quarter on quarter.

RIL’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 30.2 percent to Rs 44,867 crore in Q2FY24.

“Resilient performance of the O2C segment despite volatility in energy markets was led by strong growth in fuel demand in a supply-constrained market. Weak global demand and supply-overhang continued to impact downstream margins,” Chairman Mukesh Ambani said in a press statement.

RIL’s other businesses, including its upstream division, reported a robust quarter.

“The growth of oil and gas business is particularly noteworthy with production from KGD6 block ramping up and providing valuable fuel for energy transition to the Indian economy,” said Ambani.

O2C (oil-to-chemicals) business

Revenue for Reliance’s O2C business, its biggest business, stood at Rs 1.47 lakh crore, a 7.3 percent decline, primarily on account of a sharp 14 percent year-on-year decline in crude oil prices that resulted in lower price realisation for products.

EBITDA for the quarter stood at Rs 16,281 crore, increasing 36 percent from the year ago period, on account of strength in gasoline and PVC margins, optimised feedstock sourcing and lower SAED in-line with decline in middle-distillate cracks.

RIL’s Chief Financial Officer Srikanth Venkatachari said the downstream contribution was impacted by lower delta polyethylene (-8%), polypropylene (-17%), polyester chain (-13%) and subdued global demand in a well supplied market. This was partially offset by higher domestic sales and sharp 46% decline in ethane prices.

The company’s O2C business includes refining, petrochemicals, and fuel retailing through Reliance BP Mobility Limited, aviation fuel and bulk wholesale marketing.

Oil & Gas business

The company’s oil and gas revenue, representing its upstream operations, increased 71.8 percent in the quarter, driven by higher production of gas & oil and commencement of condensate production from MJ field along with 6 percent higher gas price realization in KG D6.

The average price realised for KGD6 gas is $ 10.46 per MMBTU (million metric British thermal unit) in Q2FY24 compared to $9.86 per MMBTU in Q2FY23. The average price realised for CBM gas was $ 13.72/MMBTU in 2Q FY24, as against $23.34 per MMBTU in Q2FY23.

The segment’s EBITDA increased to Rs 4,766 crore, which is up by 50.3 percent on yearly basis.

Reliance said that the drilling & completion campaign for MJ wells has been completed successfully. All eight wells are now completed, connected, and are producing, the company said.

“With incremental gas production from MJ field, along with ongoing production from R Cluster and Satellite Cluster fields, Block KG D6 is currently producing ~29 MMSCMD,” the company said in a press release.

Jio Platforms

Jio Platforms’ profit for the second quarter stood at Rs 5,297 crore, an increase of 12 percent.

The telecom and streaming business segment’s revenue from operations stood at Rs 31,537 crore in the quarter, compared to Rs 28,506 crore in the same period last year.

Average revenue per user (ARPU), an important metric to measure the performance of telecom companies, improved 2.5 percent YoY to Rs 181.7 per user, per month.

“Jio True5G will soon be available pan-India to usher in a new digital era for Indians. JioAirFiber has seen very strong customer interest and is set to transform broadband infrastructure in the country by offering fiber like digital experience to homes and small enterprises. Ubiquitous 5G, JioBharat and JioAirFiber are three big growth engines for Jio which would accelerate market share gains and profitability,” said Akash Ambani, Chairman of Reliance Jio Infocomm.

Retail business

Reliance Retail posted a net profit of Rs 2,790 crore in the quarter, an increase of 21 percent. Revenue from operations for the quarter stood at Rs 77,148 crore, a growth of 18.8 percent Y-o-Y.

Store footfalls were at 260 million in the quarter, compared to 249 million in the previous quarter.

Grocery and fashion & lifestyle businesses maintained strong growth momentum while consumer electronics had a steady performance despite festive period falling in Q3FY24, the company said in a press release.

Reliance Retail expanded its store network with 471 new store openings taking the total store count at the end of the quarter to 18,650 stores with an area of 71.5 million square feet.

Isha Ambani, Executive Director, Reliance Retail Ventures Limited (RRVL), said, “I am delighted to report that we have delivered yet another quarter of stellar performance and achieved an all-time high across financial metrics. The performance is a testament to our customer-centric approach that defines Reliance Retail and we look forward to serving our customers this festive season with renewed optimism and enthusiasm.”

Net debt levels shrink

RIL’s net debt declined to Rs 1.17 lakh crore in September, lower than Rs 1.25 lakh crore in March this year due to the funds raised in Reliance Retail.

During the quarter, the conglomerate raised Rs 10,347 crore in Reliance Retail Ventures Ltd from investment firms KKR & Co and Qatar Investment Authority (QIA) and plans to raise additional Rs 4,967 crore for the unit from Abu Dhabi Investment Authority (ADIA) in October.

“We expect that the capex intensity will significantly decline given that the 5G network rollout is expected to be completed by and by the end of this year,” added Venkatachari. Reliance in its presentation said that strong operating cash flows largely funded capex of Rs 38,815 crore primarily towards 5G roll-out and building retail ecosystem.

Way Ahead

RIL expects the global oil demand growth to remain strong led by transportation fuels. It pegs 2023 demand to average at 101.8 mb/d, up 2.2 mb/d, and 2024 demand at 102.7 mb/d, up 0.9 mb/d.

Global downstream chemical margins are expected to remain soft with near term supply overhang.

In its retail business, the company will continue to expand its physical and online presence. “Mergers and acquisitions continues to be a core theme for us for expansion,” said Dinesh Taluja, Chief Financial Officer and Corporate Development at Reliance Retail.

The company expects its capex will peak in FY24 with completion of the fast- track Jio 5G rollout by the end of this year.