Reliance Industries (RIL), India's largest company by market valuation, has been hit by negative market sentiments though it managed to post increments in revenue and profit. The flagship business, refining and marketing (R&M) has faced severe margin fall as its earnings before interest and tax (EBIT) dropped 15.2 per cent to Rs 4,508 crore in the first quarter, despite increasing the throughput at its Jamnagar twin refineries to 17.5 million tons (MT) from 16.6 MT. As the petrochemical production volume fell affecting the revenue, the exploration and production (E&P) business continued in red.
RIL's consolidated revenue for the first quarter increased by 22.1 per cent to Rs 172,956 crore, while profit increased by 6.8 per cent to Rs 10,104 crore. But the profit fell 2.5 per cent as against the March-ended quarter of 2018-19, reflecting the slowing demand in the country. The share price of RIL fell one per cent on Friday.
The consumer businesses, retail and telecom have grown to contribute 32 per cent to the consolidated cash flow -- earnings before interest, tax, depreciations and amortization (EBITDA) -- of RIL, but depends heavily on scale ups to record rise in revenue and EBIT. The retail business has added one million square feet in the three months of the quarter, resulting in increasing the revenue by 4.2 per cent to Rs 38,196 crore, compared to the immediate previous quarter -- the fourth quarter of the last financial year. The retail EBIT increased just 3.3 per cent to Rs 1,777 crore as against 4Q 2018-19. However, compared to the first quarter of the last financial year, it posted massive jump.
Reliance Jio posted a 54.5 per cent jump in revenue q-on-q to Rs 14,910 crore and 79.6 per cent rise in profit to Rs 3,080 crore. The customer base increased to 331.1 million from 306.7 million in March 2019. But Jio's EBITDA of Rs 4,686 crore (8.2 per cent Q-on-Q growth) is not enough considering the over Rs 3 lakh crore investment that RIL has made in the business.
The outstanding debt of RIL stood at Rs 288,243 crore as against to Rs 287,505 crore on 31st March, 2019. It had transferred Reliance Jio Infratel's fibre and the tower businesses had been transferred into two separate Infrastructure Investment Trusts (InvITs) -- Digital Fibre Infrastructure Trust and Tower Infrastructure Trust -- in the last quarter of the last financial year. The InvIT formation was eventually to reduce the debt of Jio Infratel's liabilities. With this, the telecom debt came down by Rs 1,07,000 crore.
RIL on Friday said that an affiliate of Brookfield Asset Management has invested Rs 25,215 crore in the Tower Infrastructure Trust, which has 51 per cent stake in Jio Infratel. The proceeds will be used to repay certain existing financial liabilities of Infratel and to acquire the remaining 49 per cent of equity share capital of Infratel from RIL. The investment in the tower business and the transfer of a part of telecom debt to the trusts will help Reliance Jio make further investments in the sector, especially when the country gears up to launch 5G services.
Gross refining margin (GRM) of RIL has witnessed a fall for the straight seventh quarter to $8.1 a barrel from $10.5 one year back. The revenue from R&M increased by 6.4 per cent to Rs 101,721 crore, thanks to higher volumes. The performance of R&M was impacted significantly by lower product cracks. However, RIL maintained significant premium over Singapore complex margins. The petrochemicals revenue decreased by 6.6 per cent to Rs 37,611 crore due to decrease in volumes and price realizations, primarily in Paraxylene (PX) and Monoethylene Glycol (MEG), which was partially offset by increase in volumes of Polyesters. The segment EBIT was at Rs 7,508 crore, down 4.4 per cent. Considering RIL's recent investment of Rs 1 lakh crore in petrochemical capacity, the fall in volume and earnings are not a good sign.
The revenue for the oil and gas E&P business decreased by 35.5 per cent to Rs 923 crore, while EBIT loss reduced to Rs 249 crore as against a loss of Rs 447 crore in the corresponding period of the previous year. The segment performance continued to be impacted by declining volume. The domestic production was lower 35 per cent and production in US Shale operations declined by 34 per cent.