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India’s largest private company Reliance Industries Ltd posted nearly 12% higher net profit in the December quarter as its digital and retail businesses levelled up, and its legacy petrochemicals business showed signs of revival.
The Mukesh Ambani-led conglomerate on Thursday said net profit for the quarter jumped 11.7% from a year earlier to ₹21,930 crore, beating Bloomberg estimates. Consolidated quarterly revenue was up 7.7% at ₹2.67 trillion.
“The O2C business showcased its innate resilience, registering growth even in this prolonged period of volatility in the global energy markets,” said Ambani, RIL’s chairman and managing director.
Over the past year, the conglomerate has struggled to improve margins in its largest business of oil to chemicals (O2C), which produces petrochemical products with a wide range of domestic and industrial use. Over the past few months, RIL’s stock has traded around ₹1,200, despite a bonus issue in October. On Thursday, RIL shares closed 1.31% higher at ₹1268.7 on BSE, before the earnings announcement.
To be sure, most companies in petrochemicals have seen weak global demand over the past few quarters. However, RIL’s latest figures show that demand may be improving – The O2C business, which alone contributes 50% to RIL’s revenue, reported growth, though marginal. Thanks to higher production, revenues from this segment grew 6% to ₹1.49 trillion in Q3 from a year earlier.
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However, operating profit of the O2C business in Q3 was up just 2.4% year-on-year at ₹14,402 crore, and the operating margin at 9.8% was slightly better than in Q2, but 40 basis points below the third quarter of last fiscal year.
“Refining margins recovered sequentially, with petrochemical deltas exhibiting a mixed trend,” Ambani said.
RIL said the benefits of ethane cracking over naphtha and focus on yield optimization helped offset the impact of unfavourable fuel cracks during the third quarter.
Domestic demand for key petrochemical products such as polypropylene, polyethylene and PVC rose in Q3, led by consumer durables, packaging, construction and automotive sectors, along with increasing demand in the agriculture and infrastructure.
Over the past decade, RIL has diversified to tackle challenges due to the cyclicality of demand in oil-related businesses. The attempts seem to be paying off: During the quarter, its digital business division Jio Platforms and Reliance Retail contributed significantly to profits.
In Q3, Jio Platforms’ net profit jumped 25.9% to ₹6,857 crore, while Reliance Retail’s profit swelled 10.1% to ₹3,485 crore.
The conglomerate said Jio Platforms’ revenue rose 19.2% ₹38,750 crore as benefits from the phone tariff hikes flow in, as well as healthy growth in its homes and digital services businesses. Reliance Retail’s revenue rose 8.8% to ₹90,333 crore, with growth visible in consumption baskets driven by festive buying and wedding season demand.
“Robust growth in digital services business was led by sustained subscriber addition and consistent improvement in customer engagement metrics,” Ambani said.
During the quarter, Jio’s digital business connected 2 million new homes. Its subscriber base stood at 482 million, up 2.4% from a year earlier.
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“Customer addition has rebounded to pre-tariff-hike levels in the exit month after transient SIM consolidation,” RIL said. During the quarter, Jio launched JioAICloud, an AI-powered cloud service offering up to 100 GB of free cloud storage.
Akash Ambani, chairman of Reliance Jio Infocomm, said, “Jio has played a key role in digital inclusion by bringing the world’s best communication technologies for every Indian.”
Reliance Jio Infocomm surpassed analysts’ expectations on net profit, revenue and average revenue per user (Arpu) due to higher customer uptake in AirFiber, RIL’s high-speed wireless internet service, and mobile customers returning to the fold. Jio is set to become the largest AirFiber service provider globally in the coming months, said Anshuman Thakur, head of strategy at Reliance Jio Infocomm.
Jio said about 70% of the new connections are coming from beyond the top 1,000 towns and cities, and it plans to add 1 million homes every month to connect 100 million to AirFiber.
Arpu in Q3 was ₹203.3, up from ₹195.1 in Q2, and up 12% on-year from ₹181.7. Jio said the residual impact of the tariff hike will play out in the coming quarters.
The retail business also recorded a jump in revenues and operating income due to higher footfalls and a surge in online shopping demand during the festive season. RIL recorded a total footfall of 296 million across formats and opened 779 new stores during the quarter, taking its store count to 19,102.
RIL said its grocery business grew by 37% year-on-year and the fashion and lifestyle consumption business witnessed a strong turnaround during the third quarter.
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During the festive months, RIL’s consumer electronics business saw better sales than previous quarters, fueled further by new product launches and promotions, resulting in a 12% Y-o-Y growth.
Isha Ambani, executive director, Reliance Retail said, “We are creating through JioMart – express deliveries, scheduled deliveries coupled with Milkbasket – subscription services, a seamless shopping experience that serves diverse customers across all categories and catchment.”
Suneera Tandon contributed to this story
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