RIL’s consumer-facing businesses continue their charge; RJio shines

Anand Kalyanaraman BL Research Bureau | Updated on July 27, 2018

FILE PHOTO: Labourers work behind an advertisement of Reliance Industries Limited at a construction site in Mumbai, India, March 2, 2016. REUTERS/Shailesh Andrade/File Photo   -  REUTERS

Petchem makes a strong delivery again

The June 2018 quarter scorecard of Reliance Industries Ltd (RIL) reflects the company’s ongoing aggressive focus in its key consumer-facing business — digital and retail — in line with the objective of increasing their share to that of the oil and allied businesses.

Digital and retail continued to grow at a blistering pace; together, they now contribute more than a fifth of the company’s overall operating profit.

Revenue from the digital business (RJio) in the June quarter was close to ₹10,000 crore from just about ₹150 crore in the year-ago period. Also, for the third consecutive quarter, the segment remained the company’s third largest in terms of operating profit (₹1,715 crore).

Subscriber base

It had posted operating loss of ₹22 crore in the year-ago period and profit of ₹1,495 crore in the March 2018 quarter. Even as its peers reel due to its disruptive tactics, RJio’s rapid growth has been driven by continued increase in the subscriber base to 215.3 million (as of June 2018), growing data usage by subscribers and healthy ARPU (about ₹20 more than Bharti Airtel).

The retail business too delivered strongly with revenue more than doubling and operating profit nearly quadrupling YoY to ₹1,069 crore in the June quarter. This was aided by continued store additions, growth across various retail segments and expansion in margins.

Completing the trifecta yet again for RIL, third quarter in a row, was the petrochemicals segment — the company’s largest profit contributor. Aided by strong volume growth and improvement in margins, the segment’s June quarter sales grew nearly 60 per cent YoY and profit almost doubled to ₹7,857 crore.

Weakness in refining

The strong show by these three businesses again helped offset the weakness in the refining, and oil & gas exploration segments. Operating profit in the refining business fell nearly 17 per cent YoY to ₹5,315 crore. This was due to a decline in gross refining margin to $10.5 a barrel from $11.9 a barrel in the year-ago period, in line with the dip in the Singapore benchmark. Lower crude processing added to the pain. But refining similar to petrochemicals is a cyclical business with periodic ups and downs.

The oil and gas exploration business continued to languish due to declining volumes, locally and internationally. This resulted in the segment’s operating loss widening to ₹447 crore from ₹373 crore in the year-ago period. The loss though was lower than in the March 2018 quarter (₹600 crore).


Overall, the company’s adjusted profit grew about 18 per cent YoY to ₹9,459 crore. The profit growth, while healthy, was much slower than the nearly 57 per cent revenue rise, reflecting the impact of lower refining margins, and higher depreciation and interest costs, a result of the huge expansions in the consumer-facing and petrochemicals businesses. The company’s financial position remains robust with cash and equivalents at nearly ₹79,000 crore.

The RIL stock has been going from strength to strength over the past year or so, and the good show in the June quarter should provide support to the stock.

Published on July 27, 2018

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