Reliance Industries Q3 Results: Profit Rises 14.8% On Higher Operating Margin, Beats Estimates

Product spreads and refining margins helped the company post better-than-expected numbers.

<div class="paragraphs"><p>Reliance Industries Ltd. (Source: Company website)</p></div>
Reliance Industries Ltd. (Source: Company website)

Reliance Industries Ltd.’s third-quarter profit rose on higher operating margins beating analyst estimates. 

The Mukesh Ambani-led conglomerate’s consolidated profit rose 14.8% sequentially to Rs 17,806 crore in the quarter ended December, according to its exchange filing. That compares with the Rs 16,037-crore consensus estimate of analysts tracked by Bloomberg.    

RIL Q3 FY23 Highlights (QoQ) 

  • Revenue from operations fell 5.26% to Rs 2,20,592 crore, against the estimated Rs 2,29,000 crore.  

  • Operating profit or earnings before interest, taxes and depreciation rose 24% to Rs 35,247 crore, compared with the Rs 33,626-crore forecast. 

  • Operating margin stood at 16.2% versus 12.4%, as of September.  

Mukesh Ambani, chairman and managing director of Reliance Industries, said, “Our teams across businesses have done an excellent job in delivering strong operating performance through a challenging environment. All segments contributed to the robust growth in consolidated Ebitda on YoY basis."

In O2C business, middle distillate product fundamentals remained strong with firm demand, constrained supply, and high natural gas prices in Europe. Downstream chemical products witnessed margin pressure with excess supply and relatively weak regional demand, he said.

"Our focus remains on operating safely and reliably producing vital fuel and materials for consumers. Jio delivered record revenues and Ebitda, driven by strong momentum in customer growth and data consumption."

Fundraising Plans

In a separate statement the company said that its board of directors on Friday decided to raise Rs 20,000 crore as non-convertible debentures in one or more tranches on a private placement basis.

Further details are awaited on the purpose of fundraising and where the funds will be deployed.

RIL's outstanding debt, as on Dec. 31, 2022, was Rs 3,03,530 crore or $36.7 billion. The cash and cash equivalents, as on Dec. 31, 2022, were at Rs 1,93,282 crore or $23.4 billion.

The company's capital expenditure for the quarter ended December was Rs 37,599 crore or $4.5 billion. "Net debt is lower than annualized Ebitda," the company said in a statement.

Segment Updates

Oil-To-Chemicals (O2C) 

The O2C revenues dropped by 9.41% QoQ to Rs 1,44,630 crore on lower throughput and planned maintenance and inspection turnaround during the quarter.

On a YoY basis, it rose 10% on account of higher price realisation as crude oil prices went up by 11%, the company said. 

Exports, too, dropped on a sequential basis to Rs 78,331 crore from Rs 86,321 crore due to lower downstream product volumes. However, on a year-on-year basis, it rose 21% due to higher price realisations.  

Segment Ebitda was at Rs 13,926 crore compared with Rs 11,968 crore in Q2 FY23, supported by strength in middle distillate cracks. This was partially offset by weak margins across polymer, polyester chain and light distillates products. Continued special additional excise duties on transportation fuels also impacted earnings by Rs 1,898 crore, the company said. 

Although the total throughput rose marginally to 18.8 MMTPA from 18.6 MMTPA in Q2 FY23, it fell on a year-on-year basis. Last year, for the same quarter, the throughput was 19.7 MMTPA. 

Global oil demand in Q3 FY23 declined by 0.4 million barrel a day YoY to 100.5 mb/d as slower demand from OECD countries outweighed resilient demand from Middle East, Africa and Asia (ex-China).

“Capacity outages due to seasonal maintenance and industrial action in France resulted in lower oil demand. Demand for gas oil remained strong offsetting weakness in gasoline demand,” the company said. 

Oil & Gas 

The third quarter segment revenue rose 16.11% sequentially to Rs 4,474 crore led by improved gas price realisation and higher production. Average gas price realised for KGD6 was at $11.3/million metric British thermal unit in Q3 FY23 compared with $6.1/MMBTU in Q3 FY22, after the government of India raised the administered gas price ceiling to around $12.46/MMBTU.

The segment Ebitda increased sharply to Rs 3,880 crore, which is up two times on a YoY basis. Ebitda margin stood at 86.7%. 

The company said that the production from its MJ field is on track and is expected to commence during the fourth quarter of the current fiscal.  

“The phase-II drilling and completion campaign for production hole drilling, lower and upper completions is in progress. Offshore installation campaign has been successfully completed."  

The company expects incremental gas production from MJ field along with production from R-Cluster and Satellite-Cluster to deliver around 30 million metric standard cubic meters per day in FY24. 

RIL cautioned that geopolitical uncertainty and constrained supplies are likely to keep gas prices firm in the near-term.  

Jio Platforms 

The segment revenue from operations rose to 2.54% QoQ to Rs 24,892 crore, largely driven by steady increase in both subscriber base and average revenue per user for the connectivity business. 

Segment Ebitda rose to Rs 12,519 crore from Rs 12,011 crore sequentially led by strong revenue growth and margin improvement. The Ebitda margin increased by 170 basis points YoY due to increased ARPU and benefit from lower spectrum usage charges.  

The platform added 5.3 million net subscribers as gross additions remained strong at 34.2 million in Q3 FY23. ARPU increased sequentially due to better subscriber mix, the company said.  

Sustained subscriber additions and higher ARPU have driven the revenue and Ebitda growth for the connectivity business. In addition, higher realizations from digital services have driven the JPL consolidated revenue growth, the company said. 

Reliance Retail 

Revenue from operations rose to Rs 60,096 crore from Rs 57,694 crore sequentially on well-rounded growth across all baskets and channels, the company said.

Ebitda from operations increased to Rs 4,657 crore from Rs 4,286 crore sequentially, led by improvement in the operating margins that was, in turn, driven by favourable subscriber mix, operating leverage and efficiencies, the company said. 

 The business expanded its physical store network by opening 789 new stores totaling to an area of 6 million (60 lakh) square feet.  

In Q3 FY23, the company recorded the highest-ever footfalls at 201 million (20.1 crore) across formats and geographies. The business continued to invest in bolstering its infrastructure capabilities by expanding over 2.2 million (22 lakh) square feet of warehouse space, it said. 

Shares of RIL ended 1.15% lower ahead of the results on Friday, compared with a 0.39% fall in the benchmark Sensex.