RIL tumbles nearly 4% on weaker than expected profits, slowdown in retail business and decline in Jio subscriber additions

• Shares of the Mukesh Ambani owned Reliance Industries fell sharply today by as much as 4% in reaction to its earnings results on Friday evening.
• The company had reported a weaker than expected net profit with a fall in profitability for the first time in FY22.
• Indian benchmark indices, Sensex and Nifty 50, also remain in a weak spot as there was a huge sell-off in shares of heavyweight Reliance Industries.

Shares of oil-to-telecom conglomerate company owned by Mukesh Ambani were among the biggest losers on the street and one of the reason benchmark indices was still in red.

Reliance Industries reported a weaker than expected net profit and also reported a fall in profitability for the first time in FY22.

Indian benchmark indices, Sensex and Nifty 50 remained in a weak spot as there was a huge sell-off in shares of heavyweight Reliance Industries amid poor market conditions.

The company posted a net profit of ₹18,000 crore with a revenue of ₹2.11 lakh crore in the March quarter – a decline of 12.25% in profit sequentially, while revenue is up 10.77%. Analysts expected a growth of 4.7% in profit and 14.5% in revenue.

Consolidated profit after tax missed the street’s estimate by 4% year-on-year and 3% quarter-on-quarter due to lower other income and miss in retail business, say analysts at Sharekhan.
Meanwhile, analysts at Kotak Institutional Equities feel rise in net debt levels, elevated capex and negative FCF (free cash flow) were a tad disappointing yet again in the March quarter earnings of the company.

Quarterly performance of Reliance Retail in Jan-Mar was disappointing

The latest report by Sharekhan analysing the company’s March quarter earnings states that the retail revenues were muted and remained flat on quarter versus expectation of decent growth in Jan-Mar.

Further, analysts feel an IPO of the company’s consumer business would give better returns to investors over coming years and unlock value in the digital and retail business of the firm.

Reliance Retail’s net profit declined by ₹120 crore in the January-March quarter of 2022, on a quarterly basis. The company reported a net profit of ₹2,139 crore in Q4 compared to ₹2,239 crore in the previous quarter. Even on a year-on-year basis, Reliance Retail’s net profit declined.

Analysts at YES Securities believe RIL’s retail business could be impacted by the current inflationary environment in FY23.

The report adds that the petrochemical environment appears weak primarily due to tepid Chinese demand and firmer naphtha prices. RIL exports Naphtha that typically is consumed in steam crackers for petrochemical manufacturing.

Decline in subscribers at Reliance Jio remains a key negative, say analysts

This is the third consecutive quarter of subscriber loss for Reliance Jio – it has lost over 30 million subscribers over the last three quarters. Overall, for the financial year 2021-22, Jio’s subscriber numbers are down by 16 million.

Slower-than-expected subscriber additions and ramp-up of broadband services, remains a key risk for the company, says analysts at Sharekhan.

The telecom segment posted 14% growth in its net profit between January and March 2022, which is Jio’s strongest profit growth in five quarters, but still below analyst expectations of ₹5,000 crore quarterly profit.

On the bright side, analysys believe that the company's ARPU (average revenue per user) could improve further in FY23.

As of 11:34 a.m, shares of the company were down 2.88% at ₹2,545 per share. Going ahead, analysts expect shares to increase by up to 27%.

$RELIANCE.NSE Daily Chart:- > Price is at Major Support Zone > 2500 Big Round Number > 50 EMA Support area Plan is to Buy on Bullish Price Action till 2680 .

— (@Tradingmonks) May 09, 2022

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