RIL Q2 results: Refining, petchem improve margins; Reliance Jio, Reliance Retail emerge as winners

The biggest relief for Reliance Industries (RIL) in the second quarter result is the revival of its gross refining margin (GRM), reduction in the capital expenditure (capex) and rise in the margins of retail and digital businesses. Despite the slowdown in the domestic market, the company has been able to increase the consolidated revenue by 4.8 per cent to Rs 1,63,854 crore. Profit has risen by 18.3 per cent to Rs 11,262 crore.

The export of the company has been reduced by 12.1 per cent to Rs 53,161 crore, largely because of its increased focus on the Indian market. Domestic oil demand grew by 2.6 per cent in the second quarter and petrol and LPG grew by 8 per cent and 9 per cent respectively, the company said. In its 1,385 fuel retail outlets, the diesel volume grew by 14 per cent and the petrol volume increased by 17 per cent.

The gross refining margin (GRM) of RIL had been falling for the last seven quarters until June 2019. It bounced back to $9.4 a barrel in the second quarter as against $8.1 in the first quarter. Despite the fall in refinery throughput by 1.2 million tonne (MT), the refining and marketing business posted a 10 per cent jump in earnings before interest and tax (EBIT) to Rs 4,957 crore in second quarter, compared to the first quarter.

The EBIT of petrochemical business, which had incurred a capex of Rs 1 lakh crore for expansion in the last three years, has slightly improved its performance in the sequential quarters, but it fell by 6.4 per cent to Rs 7,602 crore compared to second quarter of last year. The prices of petrochemical products have been falling and it affected the margins also. But the EBIT margin has improved to 19.7 per cent as against 18.6 per cent, mainly due to record petrochemical production and cost optimisation through light-feed cracking.

Also read: Reliance Industries Q2 result: Profit rises 18% to Rs 11,262 crore, revenue up 5%

The telecom business, which absorbed a capex of Rs 3.5 lakh crore, is witnessing a reduction in new investments. In the second quarter, Reliance Jio's investments stood at Rs 5,000 crore. It posted a 45.4 per cent jump in its standalone net profit to Rs 990 crore. The telecom player, which has a subscriber base of 355.2 million, has paid a net interconnection usage charge of Rs 652 crore during July-September 2019 for outgoing calls made on networks of its competitors. The company recently announced that it will charge its users 6 paise per minute for every outgoing call on the network of its competitors. Average revenue per user (ARPU) during the second quarter decreased to Rs 120 per subscriber a month, compared to Rs 131.7 in the same quarter last year.

The retail business' segment revenues grew by 27 per cent to Rs 41,202 crore with strong growth across formats despite consumption slowdown. The profit before depreciation, interest and tax (PBDIT) grew by 66.8 per cent to Rs 2,322 crore. EBIT margins improved 110 bps to 4.9 per cent led by customer centricity, operational efficiencies and expansion in Tier 3 and Tier 4 markets. During the quarter, Reliance Retail added 337 stores taking the total store count to 10,901 stores, with area under operations of 24.5 million sq ft.

The consolidated debt increased to Rs 291,982 crore, compared to Rs 287,505 crore as on March, 2019. Cash and cash equivalents were at Rs 134,746 crore. The company is in mission to reduce its net debt to zero by March 2021 from the current Rs 157,236 crore.

Also read: Reliance Jio net profit rises 45% to Rs 990 crore in Q2 FY20; subscriber base crosses 350 million

Also read: RIL Q2 result: Reliance Retail's profit rises over 55% to Rs 1,148 crore