Reliance reports a profit decline in Q2 even as revenue surges 33% YoY

• Oil-to-data giant Reliance Industries today reported a marginal decline in its net profit even as its revenue surged over 33% year-on-year.
• Reliance’s retail segment continued to perform healthy while the O2C business reported growth primarily on account of higher crude oil prices.
• The telecom business remained steady with a growth of 3.4%, in line with analyst expectations.

Mukesh Ambani-led Reliance Industries today reported marginal decline in its net profit on a year-on-year basis despite strong performance in its refining and retail segments, while its telecom business Jio reported a modest 3% sequential growth. Reliance reported total revenue of ₹2.32 lakh crore during the September quarter, up 33.7% YoY and net profit of ₹13,656 crore, a decline of 0.2% in the same period.

On a sequential basis, the revenue increased 4.4% while profit fell 24%.

Reliance’s O2C business came close to the revenue generated in the previous quarter – at ₹1,59,671 crore, it fell short of its Q1 revenue by a little over 1%. Q1 was the strongest quarter ever for the company’s O2C business. Its contribution to Reliance’s overall revenue remained healthy, at a little over 68%, marginally down from 72% in the previous quarter.

Price volatility and weak downstream margins had an impact on the O2C segment’s EBITDA margins – on a YoY basis, O2C segment’s EBITDA fell 5.9% to ₹11,968 crore, from ₹12,720 crore. The sequential decline was far worse at 39.8%, down from ₹19,888 crore.

In its exchange filing, Reliance said the decline in O2C EBITDA was primarily on account of special additional excise duty, which accounted for ₹4,039 crore.

Here’s Reliance Industries’ Q2 in numbers:

Particulars	Q2 FY23	Q1 FY23	Q2 FY22
Revenue	₹2,32,863 crore	₹2,23,113 crore	₹1,74,104 crore
Net profit	₹13,656 crore	₹17,955 crore	₹13,680 crore
Net margin	5.9%	8%	7.90%

Source: Company reports

“Performance of our 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,” said Mukesh Ambani, chairman and managing director, Reliance Industries.

Finance costs continue to put a lid on the company’s overall performance, with an increase of 19.2% YoY to ₹4,554 crore – something that a previous Business Insider India report highlighted could soon become a problem for high-debt companies.

Retail business continues to beat inflation woes

Reliance’s retail segment delivered healthy growth even as inflation continues to be a problem for many. The retail segment reported a 44.5% YoY growth in revenue to ₹57,694 crore, while also improving its margins during this period. However, it did witness a marginal decline in margins sequentially from 7.6% to 7.4%.

Overall, though, since the retail segment’s revenues surged both sequentially and YoY, the EBITDA was higher in absolute terms at ₹4,404 crore.

“Our Retail business delivered record performance with strong revival in footfalls, store additions and digital integration,” Ambani said.

Reliance also announced that the retail segment’s area of operation has increased to 54.5 million square feet, up from 37.3 million square feet last year. The company opened 795 new stores during the quarter, taking its total operational stores to 16,617.

Jio delivers modest growth in profit, ARPU and subscribers

The company’s telecom arm, Reliance Jio posted a modest 4.4% sequential increase in its net profit after a moderate June quarter, in line with analyst expectations.

The largest telco in India added 7.7 million new subscribers to its network, while its average revenue per user saw a moderate increase of 0.9% to ₹177.2 from ₹175.7 in the previous quarter.

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