Windfall tax impact: Reliance net profit flat in Q2 at Rs 13,656 crore

Mukesh Ambani-led Reliance Industries (RIL) on Friday reported a consolidated net profit (attributable to the company’s owners) of Rs 13,656 crore for the quarter ended September 30, 2022 (Q2).

This was almost flat over the year-ago period figure of Rs 13,680 crore, but fell well short of expectations.

A poll of analysts by Bloomberg had pegged net profit at Rs 14,457 crore for Q2 of 2022-23.

The oil-to-telecom conglomerate’s gross sales for the quarter came in at Rs 2.53 trillion, up 32 per cent over the year-ago period.

Excluding goods and services tax and excise duty, net sales surged 37.3 per cent year-on-year  to Rs 2.3 trillion for the reported quarter, marginally above the street estimate of Rs 2.25 trillion.

The Q2 top line reflected in the company’s overall operating show too.

Consolidated earnings before interest, tax, depreciation and amortisation (Ebitda) increased 14.46 per cent YoY to Rs 34,663 crore in Q2, beating the estimate of Rs 30,336 crore.

The performance at net-profit level would have been better but for the weakness seen in the oil-to-chemicals (O2C) business as well as the special additional excise duty (SAED) — windfall tax —imposed by the government from July 1, 2022.

Mukesh Ambani, chairman and managing director, RIL, in a statement, said: “(The) performance of our oil-to-chemicals (O2C) business reflects subdued demand and weak margin environment across downstream chemical products. Transportation fuel margins were better than last year, but significantly lower sequentially.” 

“Segment performance was also impacted by the introduction of special additional excise duties during the quarter to ensure stable supply and lower volatility in the domestic market. I am pleased with the record performance of our consumer businesses which continue to scale new milestones every quarter,” Ambani added.

RIL said that Reliance Retail and Jio Platforms reported record Ebitda for the September quarter, and that Reliance Retail became the first Indian retailer with over 50 million square feet of retail space.

New hires for the first six months ending September 2022 was 1.4 lakh.

RIL also announced on Friday it was demerging its financial services business into Jio Financial Services (JFS) and listing it.

Shareholders of RIL will get one share of JFS for every share held in RIL.

On Friday, ahead of the results, the RIL scrip closed 1.16 per cent down on the BSE at Rs 2,471.95.

Year-to-date, the index heavyweight is up 4.37 per cent. However, it is down 5.75 per cent in the last one year.

At 9.05 pm India time on Friday, RIL’s GDR (representing two equity shares) was down 1 per cent at $59.8 on the London Stock Exchange.

Meanwhile, other income fell by nearly 17 per cent to Rs 3,514 crore in Q2FY23 from Rs 4,224 crore a year ago. Tax for the quarter increased by 30 per cent to Rs 4,867 crore from Rs 3,755 crore a year ago.

These, along with the impact on the O2C business, possibly explain the company’s profit missing Street estimates at net level, analysts said.

Reliance’s O2C segment revenue grew 32.5 per cent year-on-year to Rs 1.6 trillion, led by higher prices of crude oil and other products.

The O2C Ebitda declined by 5.9 per cent YoY to Rs 11,968 crore on account of the introduction of special additional excise duty on transportation fuels and weak polymer deltas, the company said in an earnings call.

However, sequentially, O2C revenue fell 1.26 per cent, while its Ebitda was down 39.82 per cent from Rs 19,888 crore in the April-June quarter on account of volatile energy markets, windfall taxes imposed in the September quarter and lower realisation of product cracks.

The company said that SAED-related costs were Rs 4,039 crore in the September quarter.

Jio Platforms’ Ebitda for the quarter was Rs 12,011 crore, an increase of 29.2 per cent over the corresponding period last year, while net profit grew 26.9 per cent to Rs 4,729 crore.

Jio’s net subscriber addition grew by 7.7 million to 427.6 million for the quarter.

Reliance Retail’s net profit for Q2 was up 36 per cent YoY to Rs 2,305 crore, while its Ebitda increased 51.2 per cent to Rs 4,404 crore in the quarter, its highest ever, the company said. The country’s largest retailer’s cash profit for the quarter rose 45 per cent to Rs 3,324 crore.

Reliance Retail delivered revenue from operations of Rs 57,694 crore, up 44.5 per cent year-on-year, in the quarter under review, as its business witnessed no operating disruptions since the onset of Covid.