RIL fires on all cylinders, net profit jumps 27% to ₹17,394 crore in Q2

• The star of the quarter was Reliance Retail, which reported a sharp rise in revenues and income.
• Reliance Jio’s revenues increased by 10.6% on year to ₹31,537 crore, thanks to a 7.5% increase in subscriber base and higher ARPU.
• Profitability of the O2C segment was driven by better gas price realization and 66% growth in KGD6 gas volumes.

Billionaire Mukesh Ambani-led Reliance Industries reported a robust 27% year-on-year jump in its net profit at ₹17,394 crore for the quarter ended 30 September, while revenues rose 1% to ₹2.32 lakh crore. The company’s quarterly performance has beaten the Street’s expectations on all counts, as all three business segments fired on all cylinders. The quarter’s performance was driven by the consumer businesses yet again.

RIL’s operating income (earnings before interest, depreciation, and amortization) has jumped 30.2% to ₹ 44,867 crore. The O2C business which has been showing weakness in the last few quarters appears to have recovered too, despite volatility in the crude prices. Finance costs have remained stable sequentially at ₹5,731 crore, but are up 25.8% year-on-year. Tax expenses increased by 38.0% Y-o-Y to ₹ 6,673 crore ($ 804 million) in 2Q FY24.

RIL’s quarterly revenues were driven by robust growth across its three key verticals. The star of the quarter was the retail business, which reported a sharp rise in revenues and profit. Operating leverage and continued focus on cost management initiatives helped Reliance Retail’s operating margin to rise by 80 basis points to 8.4% in the second quarter. Retail business’s revenues grew by 18.8% on year to ₹77,148 crore. Quarterly EBITDA of retail business has risen 32.2% year-on-year to ₹5,820 crore. The food & grocery segment of Reliance Retail grew by 33%. While revenues from the O2C segment saw revenues decline due to a 14% decrease in crude oil prices leading to lower price realization for products, profitability of the segment was driven by better gas price realization and 66% growth in KGD6 gas volumes.

Jio Platforms reported a revenue growth of 10.6% on year to ₹31,537 crore, thanks to a 7.5% increase in subscriber base and higher average revenue per user. Jio’s EBITDA grew 12.6% year-on-year to ₹13,528 crore.

Commenting on the company’s performance during the quarter, Mukesh D Ambani, Chairman and Managing Director of RIL said: “Strong operational and financial contribution from all business segments has helped Reliance deliver another quarter of robust growth. Reliance Retail has continued to rapidly expand its offline as well as online presence, while adding to its already impressive range of products and offering. Resilient performance of the O2C segment despite volatility in energy markets was led by strong growth in fuel demand in a supply-constrained market. Weak global demand and supply-overhang continued to impact downstream margins. The growth of oil and gas business is particularly noteworthy with production from KGD6 block ramping up and providing valuable fuel for energy transition to the Indian economy.”

The EBITDA margin of the oil to chemical segment is higher at 11% against 7.5% reported in the comparable quarter last year. Sequentially the operating margin is down 50 basis points.

Shares of Reliance Industries have declined by 14% since the start of the calendar year 2023, following its weak performance in its core oil to chemicals segment (O2C). Over time the company’s consumer businesses have been contributing nearly half of its total revenues, but the mainstay of profitability continues to be the O2C business. RIL’s consolidated revenues in FY23 stood at ₹9,74,864 crore, operating income was ₹1,53,920 crore and net profit was ₹73,670 crore. However, the O2C segment has been reporting weak numbers consistently for several quarters now.

In terms of revenue, Reliance Industries reported consolidated revenue of ₹2.31 lakh crore for the quarter ended June. This figure represents a 4.7% decline compared to the same period last year and a 3.3% decrease sequentially. The decline in revenue can be attributed to the underperformance of the O2C (Oil-to-Chemicals) business. However, the strong growth in the consumer business helped offset this decline to a large extent. The company's EBITDA for Q1FY24 stood at ₹41,982 crore. This represents a 1.8% increase compared to the previous quarter and a 5.1% increase compared to the same period last year.