Reliance beats street with record profit on back of gains from stake sale, Jio

Reliance Industries Ltd (RIL) on Thursday reported record net profit of Rs 13,248 crore in June quarter after one-time gain from stake sale as well as bumper telecom revenues cushioned Covid-19 hit earnings from refining, petchem and retail segments.

The net profit in April-June was 30.6 per cent higher than it was in the same period a year back and bettered the company's previous best of Rs 11,640 crore earning in October-December 2019, the company said in a statement. The oil-to-telecom conglomerate said it had a one-time gain of Rs 4,966 crore from sale of 49 per cent stake in fuel retailing venture to BP plc.

This together with 183 per cent jump in Reliance Jio's standalone net profit to Rs 2,520 crore covered up drop in earnings from mainstay segments. The consolidated net profit was 89 per cent higher than average of 12 brokerage analyst estimates of Rs 6,994 crore.

Digital services business took the lead when physical operations of oil-to-chemical (O2C) and retail faced restrictions. Telecom arm Jio contributed over 33 per cent of consolidated EBITDA to become the single-largest business segment by contribution to the total.

Overall, EBITDA declined by 11.8 per cent to Rs 21,585 crore "due to lower contribution from O2C business, which was impacted by significant demand destruction and margin pressure across transportation fuels and polyester chain," the company said. Also, lower realisation in the export market also impacted profitability.

"Closure of stores and restrictions on operations across the country due to COVID-19 contributed to a decrease in EBITDA of Retail business. This was partially offset by an increase in EBITDA of Digital services business due to improved margins and continued subscriber momentum," it said.

RIL Chairman Mukesh D Ambani said: "The severe demand destruction due to global lockdowns impacted our hydrocarbons business but the flexibility in our operations enabled us to operate at near-normal levels and deliver industry-leading results".

He said the company raised record funds during the quarter despite COVID-19 lockdown. The company raised Rs 53,124 crore through a rights issue and sold near 33 per cent stake in Jio Platforms Ltd - the firm that houses telecom business and apps - to likes of Facebook and Google for Rs 1,52,056 crore.

It also sold a 49 per cent stake in the fuel retailing business to BP for Rs 7,629 crore. "We completed the largest fundraise in Indian corporate history in this quarter," Ambani said.

At a post-earnings investor call, Anshuman Thakur, President, Reliance Jio, said Jio Platforms will retain Rs 22,981 crore out of the Rs 1,52,056 crore raised from stake sale to 13 investors and the rest would go to parent RIL.

With coronavirus lockdown shutting down malls and markets for the most part of the quarter, Reliance Retail - which so far as been leading the rise in profitability of the company alongside Jio, saw revenues dip of 17 per cent to Rs 31,633 crore and segment pre-tax profit fall by 47.4 per cent to Rs 1,083 crore.

Reliance Retail operates consumer electronic stores, fashion outlets, and grocery stores as well as upstart e-commerce venture JioMart.

"Fifty per cent of our stores were fully shut through the quarter and 29 per cent operated partially," said Dinesh Thapar, Group Chief Financial Officer at Reliance Retail. "Overall footfalls for the quarter were down 57 per cent even in grocery stores." He said the company opened 69 stores but coronavirus lockdown restricted opening of another 250 stores.

The company had 11,784 stores at the end of March. The firm's eCommerce venture, JioMart has scaled up to 200 cities, delivering essential grocery needs of customers. O2C business faced a quarter of extreme shock with product demand and supply chains freezing almost overnight.

Yet, the company's operating rates remained more than 90 per cent, significantly ahead of industry peers. RIL inverted its business model from 20 per cent-80 per cent exports-domestic to 80 per cent-20 per cent within the first 10 days of the lockdown.

Petrochemical revenues declined 33 per cent due to lower price realisations with disruptions in local and regional markets due to the pandemic outbreak.

Oil refining revenues more than halved to Rs 46,642 crore after the company earned its lowest margin in a decade on turning every barrel of crude oil into fuel. Gross refining margin of USD 6.3 per barrel compared with USD 8.1 GRM a year back and USD 8.9 per barrel in the preceding quarter.

The operator of the world's largest oil refining complex saw pre-tax earnings from the business fall 26 per cent to Rs 3,818 crore due to lower throughput.

Reliance Jio, the group's telecom arm, saw subscriber base swell to 398.3 million from 387.5 million at March-end. Earning per subscriber rose to Rs 140.3 per month from Rs 130.6 per month in the previous quarter. Net customer addition of million during the quarter despite COVID related national lockdown, Thakur said.

Total wireless data traffic for Jio was 1,420 crore GB, 30 per cent higher than the previous year. State-owned Indian Oil Corp (IOC) holds the distinction of posting the highest ever quarterly profit by any Indian firm when it had reported a net profit of Rs 14,512.81 crore in January-March 2013.