RIL Q4 net beats expectations, FY16 earnings at record high

By: | Published: April 23, 2016 6:27 AM

While it plans to spend another Rs 30,000 crore on RJio in FY17, the management refrained from giving a timeline for the launch of 4G services

RIL Q4 results FY16While it plans to spend another Rs 30,000 crore on RJio in FY17, the management refrained from giving a timeline for the launch of 4G services

Oil-to-telecom conglomerate Reliance Industries (RIL) on Friday reported an impressive set of numbers, beating estimates on almost all parameters. The company’s consolidated net profit during the January-March quarter jumped 16% year-on-year (y-o-y) to Rs 7,398 crore on the back of strong gross refining margins of $10.80 per barrel. The company’s earnings before interest and tax (Ebit) margin came in at 12.1%, up 322 basis points y-o-y, driven up by better margins in both the petrochemicals and refining businesses. The March quarter numbers thus beat expectations as Bloomberg consensus estimates had pegged RIL to report quarterly earnings of Rs 7,125 crore.

For 2015-16, the consolidated earnings of the Mukesh Ambani-led firm jumped 17.2% to a record Rs 27,630 crore as operating profit increased 18.4% y-o-y to Rs 44,257 crore. Gross refining margins for the year improved to $10.80 compared to $8.60 in FY15.

Chief financial officer Alok Agarwal said at a press conference that demand for refinery products remained steady, adding that refining margins would stay healthy even if crude oil prices reversed to levels of $50 to $60 per barrel.

“We have not seen such domestic demand growth environment in last 15 years,”added Agarwal.

The RIL stock closed down 0.21% on Friday at Rs 1,038.75 on the BSE ahead of the results announcement. Since the start of 2016, the stock has gained more than 2% compared with a 1% fall in the benchmark Sensex.

The management did not give a clear time line for the launch of 4G services via Reliance Jio Infocomm, as the company is planning to “scale up the operations to few more millions from about half a million users covered in the trial launch”.

RIL has so far spent Rs 1.2 lakh crore on building the capability to provide telecom services, with a third of the amount having been utilised to purchase spectrum. The company is looking to spend another Rs 30,000 crore in FY17, which would include investment in expanding its population coverage from 70% to 90% as well buying spectrum from Reliance Communications in the remaining four circles, which has been approved by the government, Agarwal said.

The total planned capex for FY17 is pegged at around Rs 60,000 crore, about a quarter of which is likely to be dedicated to the refining and petrochemicals businesses. The management indicated that the majority of this spending will be funded internally.

The management also confirmed output at its trophy KG-D6 oilfield was slowing; in the March quarter, production of gas from the basin stood at 31.1 billion cubic feet, lower by 15% year-on-year. The segment reported a loss of Rs 96 crore before interest and tax during the quarter compared to an Ebit margin of 13.4% in Q4FY15.

The company has pruned the allocation towards capital expenditure for shale gas for 2016 to $125-150 million from about $700-800 million in 2015.

RIL’s operating profit before other income and depreciation for the quarter rose a sharp 22% y-o-y to Rs 12,008 crore. The Ebit margins for refining business saw a strong jump from 8.7% in Q4FY15 to 13.3% in Q4FY16 while that of petrochemicals business also increased by nearly 4 percentage points to a similar level.

RIL reported a turnover of Rs 64,569 crore, a fall of 8.9%, from Rs 70,863 crore in Q3FY15. Outstanding debt as on March 31, 2016, was Rs 1,81,079 crore, while cash and cash equivalents stood at Rs 86,033 crore.

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