Mukesh Ambani’s Reliance Industries Ltd (RIL) will announce its results for the January-March quarter later today.
Mukesh Ambani’s Reliance Industries Ltd (RIL) will announce its results for the January-March quarter later today. Experts believe that Ambani’s oil and gas business is going to be on the receiving end of the fall coronavirus pandemic, with gross refining margins (GRM) falling from $9.2 per barrel to $7 per barrel. The fall in GRM is likely to steal Rs 2,000 crore in profits from Ambani, according to a report by Kotak Institutional Equities. However, the retail and telecommunication segments of Reliance Industries are to provide some cushion as the average gross revenue per user for Jio is expected to have increased in the last quarter of the previous fiscal.
Standalone profit after tax (PAT) for RIL is expected to fall to Rs 7,611 crore from Rs 9,585 crore, on-quarter basis. “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 an increase in light-heavy differentials and marketing margins on domestic sales,” Kotak Institutional equities said. Consolidated EBITDA and profits could fall by 8% and 15% respectively, the report said. Consolidated PAT of Reliance could fall as much as 14 per cent on-year basis.
Global brokerage and equity research firm, Goldman Sachs too is factoring in the loss due to the crude oil price fall. “Petchem earnings will be flattish as margins already reached the trough in 3QFY20. We expect a steeper decline in refining due to inventory loss which will be partly offset by growth in telecom earnings,” analysts ar Goldman Sachs noted in a research note. An 8% decline in EBITDA is on the cards for RIL, going by Goldman’s estimates. The brokerage remains confident that RIL’s strong balance sheet will help it tide through even if GRM stays around $7 per barrel.
Along with the hike in tariff by all telecom players in India, Jio’s customer base has also gone up by 20 million. According to analysts at Kotak, this would mean Reliance Jio’s EBITDA increases by 800 crore and average revenue per user jump to Rs 135. Profits for the telecom arm could zoom by a 139% on-year basis. With a rising demand for data witnessed in India during the lockdown, brokerage firms expect Jio’s contribution margins to increase in the coming quarters. “We see the deal as strategically significant for FB as it will enable transactions on WhatsApp, giving fillip to its effort to monetise the platform. On one hand, JioMart could enable inventory and back-end supply chain for small shops, on the other, the WhatsApp platform could enable ordering and payment providing seamless customer experience,” Edelweiss Securities said.
RIL’s board is also to consider a rights issue in its Board meeting today. The move could see India’s most cash-rich company march towards its target of becoming a zero-net-debt firm by March 2021. According to market veterans who spoke to Financial Express Online, earlier this week, the issue size could be as much as Rs 50,000 crore.