The fall in profit after a slump in core oil and chemicals business, but consumer-facing verticals did well.

reliance petrol filling station logo and name on board
Money Corporate Friday, October 30, 2020 - 22:36

Billionaire Mukesh Ambani's Reliance Industries Ltd on Friday reported a 15% drop in second quarter net profit after a slump in core oil and chemicals business dragged down continued good show in consumer-facing verticals such as telecom.

Reliance Industries Ltd reported a 15% drop in its second quarter net profit due to a weak oil business. It reported a net profit of Rs 9,567 crore in the July-September quarter, as compared to Rs 11,262 crore a year back, Reliance said in a stock exchange filing. Revenue fell to Rs 1.2 lakh crore from Rs 1.56 lakh crore in Q2 of FY20.

The oil-to-telecom-to-retail conglomerate saw consumer-facing units doing well amid the lockdown easing despite the core business facing pressure.

Digital services, which includes the telecom arm Jio, saw pre-tax profit surge 53% to Rs 8,345 crore as revenues soared by more than one-third.

Jio

Reliance Jio saw a nearly 3x profit jump in the quarter, posting a net profit of Rs 2,844 crore for the quarter. In the same period last year, Jio had posted a profit of around Rs 900 crore. On a quarter-on-quarter basis, Reliance Jio’s net profit increased by 12.85%.

The telco’s Average Revenue Per User (ARPU) is now at Rs 145, up from Rs 140 in the previous quarter, largely on the back of increased tariffs. Jio said it became the world’s first telecom operator outside China to cross 400 million subscribers in a single country market.

Jio's revenue from operations increased by 33% to Rs 17,481 crore during the quarter, compared to Rs 13,130 crore in the same period last fiscal. Jio said that its quarterly EBITDA run rate crossed $1 billion.

Jio added that its subscriber base stood at 405.6 million as on September 30, with 7.3 million new additions during the quarter. Total wireless data traffic during the quarter was 1,442 crore GB, which is a sequential growth of 1.5%. The churn rate was up at 1.69%.

Jio Platforms said it expanded efforts to develop open and interoperable interface compliant architecture based 5G solution with a virtualized RAN. “This is intended to fast track the roll out of indigenous 5G network infrastructure and services in India. Qualcomm Technologies and Jio achieved over a 1 Gbps milestone on the Reliance Jio 5GNR solution with a Tier-I carrier in the US,” Reliance said in a statement.

Retail

With markets gradually opening up in the second quarter after a strict lockdown, revenue from the retail business was almost flat at Rs 39,199 crore and EBITDA was 14% lower at Rs 2,009 crore. Its operating profit margin fell 13.77% to Rs 2,009 crore.

Reliance Retail CFO Dinesh Thapar said that the operating environment during the quarter was lower than normative levels but that it improved compared to the previous quarter.

“The operating environment was subdued, though lockdown related restrictions on store operations were progressively eased during the quarter. Partially open and fully open stores awere up to 85% in 2QFY21. Footfalls, while recovering, are still lower than pre COVID levels, particularly across Fashion & Lifestyle and mall stores,” Reliance said in its statement.

Of the 85% stores, half could operate fully, Thapar said.

Two hundred and thirty two new stores — 54 each in North and West India, 84 in South and 40 in East — were opened during the quarter, taking the total footprint to 11,931 stores —  over 29.7 million sq. ft. of retail space. Footfalls, Thapar said, was slowly recovering, although its still less in the fashion and lifestyle segments. Impulse buying, he said, was yet to recover fully.

However, digital commerce was growing for the business, primarily led by JioMart, AJIO and Reliance Digital. Digital commerce activation led  to 88% of orders being delivered from stores in less than six hours.

AJIO, he added, saw orders increase by 4 times pre-COVID, and its quarterly run rate was equal to that of the last full year.

Going ahead, Retail wants to increase store opening in grocery as well as fashion and lifestyle, scale up digital commerce, etc. 

Media business

Reliance said that ad revenues were back up as economic activity restarted, and that the news business advertising had fully recovered, and entertainment recovery is near complete.

“Subscription revenues have been resilient; and domestic subscription revenue continues to rise led by expanding TV & Digital distribution tie-ups,” Reliance said.

TV viewership is at ~1.1x pre-COVID levels, pay TV share has gone back up, it added.

Flagship properties MoneyControl and Voot have witnessed rapid growth in subscribers, Reliance said.

Petrochemicals

Petrochemicals revenue fell 23% to Rs 29,665 crore and pre-tax profit dropped 33% at Rs 5,964 crore. Refining EBITA almost halved to Rs 3,002 crore as revenue slumped 36%.

The firm's twin refineries earned $5.7 per barrel on turning every barrel of crude oil into fuel.

The profit in Q2 was lower sequentially as well as the April-June earning of Rs 13,248 crore included one-time gain of Rs 7,629 crore from sale of 49 per cent stake in petro retailing business to BP.

Commenting on the results, Reliance Industries Chairman and Managing Director Mukesh Ambani said, "We delivered strong overall operational and financial performance compared to the previous quarter with recovery in petrochemicals and retail segment and sustain growth in the digital services business."

"Domestic demand has sharply recovered across our oil-to-chemical (O2C) business and is now near the pre-Covid level for most products. Retail business activity has normalised with strong growth in key consumption baskets as lockdown ease across the country," he added.

With large capital raise in the last six months across Jio and retail business, several strategic and financial investors have joined the Reliance family, he said.

"We continue to pursue growth initiatives in each of our businesses with a focus on the India opportunity," he further said.

With inputs from PTI

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