Crashing crude oil cracks Reliance Industries fourth-quarter profit by nearly 40%

• The sharp fall in crude oil prices in the first three months of 2020 led to lower realisations across product categories for Reliance Industries.
• The bottomline would have been much worse if not for the consumer-centric businesses like Reliance Jio or Reliance Retail.
• The company's debt reduction plan seems to be on track with a ₹53,000 crore rights issue, following a 9.9% stake sale in Reliance Jio to Facebook

India's largest conglomerate by market value, Reliance Industries (RIL) reported a 38.7% drop in fourth-quarter consolidated net profit at ₹6,348 crore on weak energy and petrochemical business while the revenue fell 2.5%, compared to a year earlier.



The sharp fall in crude oil prices in the first three months of 2020 led to lower realisations across product categories for Reliance Industries, which still derives a big chunk of its revenue from the energy verticals like petrochemicals and refining. "During this period, there has been significant volatility in oil prices, resulting in uncertainty and sharp reduction in oil prices. Through the quarter, oil prices declined 73% impacting inventory valuation. In view of the above, the company has provided for non-cash inventory holding losses for the quarter," the RIL statement said.


The bottomline would have been much worse if not for the consumer-centric businesses like Reliance Jio or Reliance Retail, both of which showed spectacular growth even with the economic slowdown as well as the explosion of the coronavirus crisis towards the end of the quarter.

Reliance Jio profits jumped by more than 73% in the fourth quarter, rising to ₹2,331 crore in the last three months. A big chunk of this profit came from the 40% hike in tariffs in December 2019.


Reliance Retail has posted an operating profit of ₹2062 crore, up by 19.8% from the same quarter the previous year. The retail arm of Reliance also saw its quarterly revenue jump 4.2% to ₹38,211 crore year-on-year.

However, the company still makes over three out of four rupees in revenue from refining and petrochemicals business. The gross refining margin was down 3% in Jan-March 2020, compared to the preceding three months.


The company's debt reduction plan seems to be on track with a ₹53,000 crore rights issue, following a 9.9% stake sale in Reliance Jio to Facebook, and the continued efforts to sell stake in the oil t0 chemicals (O2C) business to Saudi Arabian refiner Aramco. "In spite of the Covid-19 crisis and the lockdowns, the due-diligence by Saudi Aramco for the planned investment in the O2C business is on track as both the parties are committed and actively engaged," the filing said.

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