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Minus BP deal, RIL Q1 profit would shrink 41%

Mumbai: Reliance Industries’ quarterly net profit rose 31 per cent to Rs 13,248 crore, helped by an exceptional gain of Rs 4,966 crore that BP Plc paid for its stake in their fuel retailing joint venture, Jio’s robust performance, and lower tax expense.

Net profit excluding the exceptional item in the April-June quarter was Rs 8,282 crore, 18 per cent more than street expectations but down from Rs 10,141 crore a year ago as lockdowns ravaged various sectors of the economy.



Telecoms venture Jio’s net profit jumped 183 per cent to Rs 2,520 crore, making it the single-biggest contributor to the conglomerate’s profit, but other businesses including Reliance Retail contracted. Gross refining margin, or the profit from converting a barrel of crude oil into fuel, fell to $6.3 from $8.1 a year ago in the volatile period when benchmark Singapore margins turned negative for the first time in two decades. Petrochemicals revenue fell by a third and EBITDA halved to Rs 4,430 crore.


“The severe demand destruction due to global lockdowns impacted our hydrocarbons business but the flexibility in operations enabled us to operate at near-normal levels and deliver industry leading results,” chairman Mukesh Ambani said. RIL is in an “exciting new phase of growth” with new partners after the big fundraising and rights issue, he said. RIL’s joint chief financial officer (CFO) Srikanth Venkatachari said consumer businesses were now contributing 47 per cent of EBITDA. “Consumer and technology growth is where we see ourselves with clear focus on innovations and intellectual property-led technology platforms,” he said.
“We have designed 5G solutions from scratch and we are focussing a lot on building Jio platforms in India across a variety of business cases,” Venkatachari said.

RIL said lower prices and the lockdown hit petrochemicals, but it quickly responded by diverting its output to the global market to keep plants running at over 90 per cent rate. “RIL inverted its business model from 20 per cent/80 per cent (exports/domestic) to 80 per cent/20 per cent within first 10 days of the lockdown, including exports from sites typically serving only domestic markets,” it said.

Explaining the exceptional item in the earnings, RIL said the company transferred its oil retail business to Reliance BP Mobility Ltd (RBML), in which the partner acquired 49 per cent by subscribing to 7.42 per cent equity stake and the balance by purchasing 41.58 per cent for Rs 7,629 crore. “During the quarter, upon receipt of requisite regulatory approval, the company recognised a gain of Rs 4,966 crore (net of taxes of Rs 1,508 crore), as an Exceptional Item.”

RIL’s consolidated quarterly income or revenue fell to Rs 95,626 crore from Rs 165,199 crore last year while expenditure fell to Rs 87,406 crore from Rs 150,858 crore.

Tax expense fell to Rs 923 crore from Rs 3,193 crore. It also posted deferred tax credit of 663 crore against deferred expense of Rs 1,032 crore. “Deferred tax credit in 1Q FY21 is primarily due to planned restructuring of O2C business in the current year. This is partially offset by increase in deferred tax expense in Digital Services business.”

Pandemic Impact

The disruption caused by the pandemic hit Reliance Retail, but it outperformed the market, RIL said. “Against the backdrop of a challenging environment, where store functioning and digital commerce fulfilment was severely impacted by lockdown and restrictions (50 per cent stores were fully shut, 29 per cent partially operated), Reliance Retail clocked significant revenues of Rs 31,633 crore and EBITDA of Rs 1,083 crore in the quarter. The performance whilst muted by the operating context, was well ahead of market,” it said.

The company’s oil exploration and production business also suffered. “Segment revenues for 1Q FY21 declined by 45.2 per cent Y-o-Y to 506 crore primarily due to lower production in domestic business post closure of Panna Mukta and D1D3 fields and lower prices. Segment EBITDA for the quarter turned negative at Rs 32 crore with lower volumes and weak realisations,” it said. Revenue from its refining and marketing segment, which propped up earnings for years, fell 54 per cent to Rs 46,642 crore while EBITDA fell 25.8 per cent to Rs 3,818 crore.

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