Reliance Industries' Q1 Net Profit Falls 11% Due To Oil-to-Chemicals Business Drag

Reliance Industries on Friday reported a 10.8 per cent year-on-year (YoY) decline in its consolidated net profit for the June quarter, as its oil-to-chemicals business weighed down the financial performance. 

The company's revenue also experienced a 5.3 per cent decrease compared to the same period last year, falling short of street estimates.

According to the company's financial statement, the consolidated net profit in the June quarter reached Rs 16,011 crore, lower than the anticipated Rs 16,509 crore. Similarly, the revenue stood at Rs 2.1 lakh crore, below street expectations of Rs 2.15 lakh crore.

Despite the overall decline in net profit and revenue, the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) managed to rise by 5.1 per cent, reaching Rs 41,982 crore. This growth was attributed to the strong performance of the consumer and upstream businesses, which offset the decline in the oil-to-chemicals (O2C) revenue. However, the operating margin for the quarter decreased to 11.4 per cent, compared to 11.9 per cent in the same period the previous year.

The O2C business, as anticipated, proved to be a challenge for the company, with revenue dropping from Rs 1.6 lakh crore to Rs 1.3 lakh crore YoY. This decline was attributed to multiple factors, including a 31 per cent fall in crude oil prices, subdued refining margins, and lower price realization due to tepid demand and supply overhangs.

Reliance Industries' officials pointed out that higher depreciation and finance costs in the quarter had a significant impact on the net profit. Depreciation rose by 31.7 per cent to Rs 11,775 crore, while finance costs surged by 46 per cent to Rs 5,837 crore, primarily due to increased loan costs.

However, the company found solace in its consumer-facing businesses, which partly mitigated the negative impact of the O2C business. The retail business saw a notable uptick in revenue, reaching Rs 69,962 crore, compared to Rs 58,560 crore in the same period the previous year, while its digital services business recorded revenue of Rs 32,077 crore, up from Rs 28,512 crore YoY.

Chairman Mukesh Ambani commented on the results, acknowledging the significant growth in the subscriber base and financial performance of the digital services business. He credited Reliance Jio's affordable offerings for driving this growth and emphasized the scaling up of digital and new commerce initiatives, delivering value to consumers and merchant partners.

In terms of capital expenditure, the company invested Rs 39,645 crore during the quarter.