Reliance Industries (RIL), the country’s most valuable company by market cap, reported a 37.2% fall in its net profits after including exceptional items at Rs 6,546 crore for the quarter-ended March. Revenues for Q4FY20 fell 2.5% to Rs 1.51 lakh crore, primarily on account of a 10.1% decline in refining and petrochemicals business revenues. The sharp fall of 20.5% year-on-year in average Brent oil price led to lower product price realisation across the hydrocarbon chain. This was partially offset by continuing growth in consumer businesses, even amidst the operational issues posed by the pandemic, RIL said.
The company, however, has put in place a blueprint for the new Reliance Industries, as it looks at carving out the oil-to-chemicals portfolio out through a slump sale. The new RIL will have a new business vertical – financial services – which will house the group’s consumer lending, insurance broking and payments business.
The company’s earnings before interest tax depreciation and amortisation (Ebitda) rose 7.6% to Rs 25,886 crore. The fourth quarter gross refining margins (GRMs) came in at $8.9/barrel (bbl) against $8.2/bbl in the same period last year on a standalone basis. Revenues from the refining and marketing segment decreased 3.4% year-on-year to Rs 84,854 crore, while segment EBIT increased by 28.2% YoY to Rs 5,706 crore with maximised crude throughput and better light distillate cracks. RIL’s petrochemical business witnessed its segment revenue fall by 24.1% year-on-year to Rs 32,206 crore in Q4FY20. Petrochemicals segment EBIT fell 42.8% on a year-on-year basis to Rs 4,553 crore with significant decline in margins. Reliance Retail’s segment revenue for Q4FY20 grew by 4.2% year-on-year (Y-o-Y) to Rs 38,211 crore as against Rs 36,663 crore in the corresponding period last year. Segment EBIT for the quarter grew by 19.8% y-o-y to Rs 2,062 crore. EBIT margins improved 70 bps to 5.4%.
For Q4FY20, RIL’s finance cost stood at Rs 6,064 crore as against Rs 4,894 crore in corresponding period of the previous year. Higher loan balances, currency depreciation and lower interest capitalisation on account of commissioning of digital projects, led to increase in finance cost by 23.9% year-on-year, RIL said.
Even as the sharp drop in oil prices impacted the company’s March quarter performance, the traction in its consumer businesses aided full year’s revenue growth. RIL’s full year consolidated revenues rose 5.4% year-on-year at Rs 659,205 crore ($ 87.1 billion). Revenues from digital services business and retail business increased by 40.7% and 24.8% Y-o-Y, respectively. Revenues for the refining and petrochemicals business declined in line with fall in average oil and product prices for the year. Average Brent oil price declined 13% Y-o-Y, while realisations for key petrochemical products declined by 15%-32% Y-o-Y. This was partially offset by higher crude throughput and petrochemicals production during the year. Its net profit after exceptional items for FY20 rose by 0.1% to Rs 39,880 crore while the operating income rose by 10.4% to Rs 1.02 lakh crore.
The company has also created an interesting new business vertical from this quarter – financial services – based on internal reorganisation of its business segments. RIL is engaged in financial services through its treasury investment activities, payment bank, consumer lending business, insurance broking business among others. Accordingly, it reported the performance of these activities as a separate business segment.
RIL’s March quarter details have the blueprint of what the company will look like in years to come. The new Reliance will be driven by the consumer businesses while the oil to chemicals business is carved out. The company’s board has approved a scheme of arrangement for the transfer of O2C to Reliance O2C Limited “as a going concern on slump sale basis for a lump sum consideration equal to the income tax net worth of the O2C undertaking as on the appointed date of the scheme”. The O2C undertaking of the company comprises of entire oil-to-chemicals business of RIL consisting of refining, petrochemicals, fuel retail & aviation fuel (majority interest only) and bulk wholesale marketing businesses together with its assets and liabilities. The board of RIL also recommended a dividend of Rs 6.50/share.
Mukesh Ambani, chairman and managing director of Reliance Industries, said RIL is fully committed on its investment plans in the consumer businesses and new initiatives. “We are at the doorsteps of a huge opportunity and our rights issue and all other equity transactions will strengthen Reliance and position us to create substantial value for all our stakeholders,” Ambani said. “Our oil-to-chemicals businesses delivered sustained earnings due to its integrated portfolio, cost-competitiveness, feedstock flexibility and product placement capabilities. We continue to operate all our major facilities at near normal utilisation levels,” he added.
The quarterly results were announced post market hours on Thursday. Shares of RIL closed the day’s session 2.86% higher at Rs 1,467.05 on the BSE on Thursday.