RIL's pre-tax profit dips 40% as Covid-19 hits energy, retail businesses

Net profit surges 31%, boosted by exceptional gain of Rs 4,966 crore from BP transaction

Mukesh Ambani-promoted Reliance Industries (RIL) reported a 40.5 per cent dip in profit before tax (PBT) and exceptional items as the pandemic and the ensuing lockdowns hit the energy and retail businesses in the June quarter.

Net profit, however, rose for the company, beating Street estimates.

RIL’s net profit was aided by an exceptional item gain arising out of the sale of partial stake in the fuel retail business to BP, as well as rise in other income.

For the April-June period, RIL reported a PBT of Rs 8,542 crore against Rs 14,366 crore reported during the same quarter last year.

RIL’s net profit, however, rose about 31 per cent to Rs 13,233 crore during April-June 2020 against Rs 10,104 crore in the same quarter last year.

In a Bloomberg poll, 10-11 analysts estimated a net profit of Rs 7,119 crore, and revenue of Rs 1 trillion for the quarter under review.

The company reported an exceptional gain of Rs 4,966 crore for the quarter under review, which was attributed to the sale of a 49 per cent equity stake in Reliance BP Mobility to BP Global Investments. 

The agreement for the petroleum retail-marketing arm was signed in December 2019 and came into effect in the June quarter.

Net sales in the June quarter fell 44 per cent to Rs 88,253 crore against Rs 1.57 trillion in the same quarter a year ago.

RIL’s net sales are at its lowest since the June 2017 quarter, where reported net sales of Rs 83,471 crore.

Profit before interest, depreciation, amortisation, and taxation (PBIDT) came at Rs 21,585 crore, a fall of 11.8 per cent compared with the same period a year ago.

Segment-wise the petrochemicals business’s profit before interest and tax (PBIT) was at Rs 3,392 crore, down 55 per cent year on year; PBIT for the retail business was down 60 per cent at Rs 722 crore.

Earnings for RIL’s refining business took a hit, down 36 per cent at Rs 2,892 crore.

The gross refining margin (GRM) was at $6.3 per barrel, against $ 8.1 per barrel reported a year ago for the June quarter.

Analysts expected the GRM to be in the range of $6.5-9. The profit performance of most of these businesses was at multi-quarter lows.

RIL’s digital services business was an outlier, with a 51 per cent jump in PBIT at Rs 4,708 crore.

“Despite a tough quarter, we were able to run our production and optimise crude cost,” said V Srikanth, joint chief financial officer, RIL.

Further commenting on the energy business, he said, “Demand recovery is expected to be capped in the near term. We see jet-fuel, for instance, will remain subdued in the near term.”

He added the focus of the oil-to-chemicals (O2C) business would remain on cost management measures.

 Of the Rs 1.52-trillion Jio Platforms has raised from 13 investors in the past four months, it has received Rs 1.15 trillion as subscription amount from 10 investors.

Of this, the company said it would retain Rs 22,981 crore at Jio Platforms to drive growth and the remaining would be used to redeem RIL’s optionally convertible preference shares (OCPS).

RIL, after completing these investments, will hold 66.48 per cent in Jio Platforms on a fully diluted basis.

The outbreak of the pandemic globally and in India is causing significant disturbance and slowdown in economic activities, the company said in a statement.

The company, however, did not disclose any numbers owing to its impact.