Mukesh Ambani's Reliance Industries profit grows 6.8% even as refining margin hits the lowest in 18 quarters

• Reliance Industries' first quarter profit grew 6.8% to ₹101 billion from a year earlier.
• The Mukesh Ambani-owned company's growth was aided by the performance of Reliance Jio and Reliance Retail.
• The company's mainstay petrochemicals business posted a profit of ₹750 billion, down 5.8% from a year earlier.
  

Reliance Industries posted a profit of ₹101 billion, a jump of 6.8% between April and June 2019 from a year earlier largely thanks to the boost from Reliance Jio and Reliance Retail.

The Mukesh Ambani-owned company's mainstay petrochemicals business struggled under the pressure from the squeeze in global trends and clocked a fall of 5.8% in profit in the same period.



Refining margins have been muted last few months due to the fall in demand for oil products. Oil product demand growth stalled to nearly zero and there is oversupply of gasoline and naphtha, Morgan Stanley said in a report on July 10. However,

According to research firm CGSCIMB, margins from petrochemicals have dropped sharply since April 2019 and the decline has been sharpest in paraxylene, which has flowed through across the polyester chain. That would mean the decline in profit would be pronounced in Reliance mainstay business, the report added.

Gross refining margin of $8.1 per barrel in the last quarter was the lowest in 18 quarters.

The fear of slump in one of the important business segment has weighed on Reliance's share price in recent months. Even on Thursday (July 18), a day before the company declares the quarterly earnings, the stock of Reliance Industries fell over a percent, that's a loss of over a billion dollars in investor wealth.


While Jio may be the rising star in Reliance Industries portfolio spanning from oil and gas exploration to petrochemicals to retail, the telecom venture brings its share of anxiety to the investor's mind-- debt. The company's total debt has increased over 58% in the last two years largely due to the investments made in Jio as well as the cash burnt in winning over the millions of customers.

Reliance Jio has today managed to raise as much as ₹25,215 crore from a Canadian asset management company, Brookfield’s subsidiary--BIF IV Jarvis India. This will help the company repay some of its mammoth debt accumulated in the process of investing in Jio and offering deep discounts to win over customers.


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