On July 19, Reliance Industries Ltd. (RIL) is anticipated to report a modest quarterly earnings increase, supported by strong results in its retail and telecom sectors as well as consistent production of oil and gas. A fall in the oil-to-chemicals (O2C) business due to lower gross refining margins (GRMs) could, however, temper the growth.
According to a Moneycontrol study, RIL’s net profit is predicted to increase by 0.6 per cent to Rs 16,082 crore for the quarter that ended on June 30. Consolidated revenue is expected to jump 12.7 per cent from a year earlier to Rs 2.36 lakh crore.
Growth Factors
RIL’s consumer-facing telecom and retail operations have performed well, propelling earnings growth; however, the O2C segment is anticipated to underperform as a result of lower refining margins compared to the previous year.
“We expect RIL to post 4 per cent year on year EBITDA (earnings before interest, taxes, depreciation, and amortisation) growth as consumer businesses and oil & gas production offset the decline in O2C margins,” analysts at BOB CAPS said in a note to clients. They noted that margins across various segments are now normalising.
Telecom growth
Analysts estimate that Reliance Jio, the telecom division, added up to 9 million new customers in the June quarter as it continued to grow its subscriber base. A minor increase in the monthly average revenue per user, or ARPU, is anticipated, which will support the expansion in revenue and EBITDA from quarter to quarter. Nine million new Jio customers were added in the June quarter of last year.
Retail Expansion
It is expected that the retail sector will continue to develop as a result of more people visiting stores and more openings. Retail EBITDA is expected to increase by sixteen per cent compared to the previous year. The preceding year witnessed a comparable pattern with considerable increases in income.
Oil & Gas Production
According to BOB CAPS, the upstream oil and gas market is anticipated to operate steadily, with margins now normalizing. The increase in O2C margins is thought to be partially offset by the oil and gas segment’s good performance.
Weak O2C Performance
Due to a large correction in GRMs, which narrowed to $3–4 per barrel in the June quarter from $7-8/bbl in the March quarter, the O2C segment is anticipated to negatively impact overall performance. It is anticipated that this reduction will cause O2C EBITDA from the previous three months to drop by 19–21%.
Conclusion
Analysts will keep a close eye on RIL’s O2C segment’s performance, especially how reduced GRMs affect profitability. Furthermore, it will be critical to provide updates on foot traffic and store addition indicators in the retail sector, as well as subscriber additions and ARPU increases in the telecom sector. Investors will also be watching for any updates on the rollout of 5G and the possible effects of the recent tariff hikes on profitability in the future.