Extraordinary gain: BP deal, other income boost RIL net profit by 31% to Rs 13,248 crore in Q1

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Published: July 31, 2020 8:00 AM

Jio was the star of the quarter, with operating income jumping 55.4% y-o-y to Rs 7,281 crore and net profits rising by a whopping 182.8% to Rs 2,520 crore.

The company’s oil to chemicals segment, which houses the petchem and refining businesses, was adversely impacted by the spread of the pandemic and sharp fall in crude prices.The company’s oil to chemicals segment, which houses the petchem and refining businesses, was adversely impacted by the spread of the pandemic and sharp fall in crude prices.

Reliance Industries (RIL) on Thursday reported a 30.6% y-o-y growth in net profit to Rs 13,248 crore in the April-June quarter, largely driven by an exceptional gain and a lower tax payout. The bottomline got a boost of Rs 4,966 crore from an exceptional profit (net of taxes of Rs 1,508 crore) from the divestment of shares of Reliance BP Mobility Services and a lower tax liability. During the quarter, tax payout was lower by 71% y-o-y at Rs 923 crore and deferred tax gains of Rs 663 crore. The company also saw a 54% y-o-y growth in other income at Rs 4,388 crore.

Lockdowns across the world impacted demand across its key business verticals — petrochemicals, refining and retail. Prices of crude oil fell on lower demand impacting refining margins. Lockdowns in India impacted retail sales while high fixed costs eroded segmental profits.

Retail revenues declined 17.2% y-o-y but the operating income fell sharply by 47.4% to Rs 1,083 crore as margins collapsed to 3.8% from 6% last year.

Jio was the star of the quarter, with operating income jumping 55.4% y-o-y to Rs 7,281 crore and net profits rising by a whopping 182.8% to Rs 2,520 crore.

RIL chairman and managing director, Mukesh Ambani, said the severe demand destruction due to global lockdowns impacted the hydrocarbons business but the flexibility in operations enabled the company to operate at near normal levels and deliver industry- leading results. “Our consumer facing businesses became the life-line for individuals and businesses…” Ambani said.

The company’s oil to chemicals segment, which houses the petchem and refining businesses, was adversely impacted by the spread of the pandemic and sharp fall in crude prices. Revenues from the petrochemicals division fell 33% year-on-year to Rs 25,192 crore on lower price realisations. Segmental Ebitda (earnings before interest, tax, depreciation, amortisation) fell by 49.7%. Operating margin collapsed to 17.6% during the quarter from 23.4% a year ago. The impact of lower realisation was partially offset by cost optimization and integration benefits. Despite the lockdowns, RIL’s petchmen division operated at over 90% levels. The company also inverted its business model from 20%/80% (exports/domestic) to 80%/20%.

The refining and marketing revenues were harder hit as they fell by 54.1% y-o-y at Rs 46,642 crore, while segment Ebitda fell by 25.8% at Rs 3,818 crore. The lower fall in operating income was due to higher margin and cost control. Brent crude price averaged at $29.2/bbl during the quarter v/s $68.8/bbl in 1QFY20, down 57.6% Y-o-Y. Reliance gross refining margins at $6.3 was impacted by lower product cracks and narrower light-heavy crude differential. However, Reliance maintained a significant premium of $7.2/bbl over regional benchmark margin.

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