Falling demand for petroleum products across the country owing to a nationwide lockdown has trimmed refining margins for India’s crude oil refineries, including Mukesh Ambani’s Reliance Industries Ltd (RIL), burning a hole in the pockets of India’s richest man. Refining margins have fallen from $9.2 per barrel of oil to $7.2/bbl since December 2019, according to a report. A cut this significant is likely to steal away almost Rs 2,000 crore in profits that Mukesh Ambani was expecting to make off his Reliance Industries in the January-March quarter, the report by Kotak Institutional Equities said. However, Mukesh Ambani’s telecom business Reliance Jio might be able to offer some respite, the report added.
Global crude oil prices slumped owing to weak demand, nudged by a price-war between Saudi Arabia and Russia. The falling crude oil price is likely to result in modest inventory loss for Reliance Industries. “We expect RIL’s standalone EBITDA to decline 18% on-quarter to Rs 10,500 crore, led by lower refining margins at US$7.2/bbl (-US$2/bbl qoq) amid sharp decline in spreads for key products, which will be partly offset by increase in light-heavy differentials and marketing margins on domestic sales,” the report said. Standalone profit after tax (PAT) for RIL is expected to fall to Rs 7,611 crore from Rs 9,585 crore, on-quarter basis.
On the other hand, Mukesh Ambani’s telecom venture Reliance Jio is likely to cushion some fall with its increasing average revenue per user. Consolidated EBITDA is expected to take an 8% fall in the January-March quarter, as Jio’s subscriber base jumps by 20 million, bringing in more revenue. Consolidated PAT could fall by 15%. Analysts at Kotak Institutional equities expect robust growth to be registered by Reliance Jio, with PAT growing by 32% as net sales surge by 11%.
The fall in profits will be another blow for India’s richest man who has seen his net worth plummet by 28% in the last two months as RIL stock price fell over 25%, according to a report by Hurun Global Rich list. With his falling net worth Ambani has lost his spot among the top 10 richest men in the world, settling on the 17th spot. Share price of Reliance Industries, in the beginning of February, stood at Rs 1,457 per share. However, as bears took over Dalal Street the stock hit its 52-week-low at Rs 875 per share in the last week of March.