Reliance Industries Q1 Results: Net Profit Slumps 17% On Higher Finance Costs

Reliance Industries Ltd.'s profit fell for the first quarter of fiscal 2024 on account of higher finance costs and depreciation.

The Mukesh Ambani-led conglomerate’s consolidated net profit attributable to owners dropped 17% sequentially to Rs 16,011 crore in the quarter ended June, according to its exchange filing. That compares with the Rs 16,995.5 crore consensus estimate of analysts tracked by Bloomberg.

Higher finance costs of Rs 5,837 crore impacted RIL's Q1 profit.

RIL Q1 FY24 Highlights (Quarter-on-Quarter)

• Revenue from operations fell 2.6% to Rs 2,10,831 crore, against the Bloomberg estimate of Rs 2,13,669 crore.

• Operating profit or earnings before interest, taxes, and depreciation, fell 0.9% to Rs 38,093 crore, as compared with the Rs 38,046 crore forecast.

• Operating margin stood at 18.1% versus 17.7% as of March.

Depreciation increased by 31.7% YoY to Rs 11,775 crore, or $1.4 billion, due to expanded asset base across all the businesses and higher network utilisation in the digital services business, the company said in a statement.

The finance costs increased by 46% YoY to Rs 5,837 crore, or $711 million, primarily due to higher interest rates and loan balances, the company said.

The drop in revenue during the quarter was led by sharp decline in the revenue from the oil-to-chemicals business, which in turn was affected by 31% year-on-year fall in crude oil prices. The fuel cracks were substantially higher during the same quarter in 2022, it said.

"However, this was partially offset by continued growth in consumer businesses and increase in volume from O2C, and oil and gas business," the company said.

According to Mukesh Ambani, chairman and managing director of Reliance Industries, the O2C business delivered a resilient performance despite continuing global macro headwinds.

Commencement of MJ field operations during the quarter will enhance India’s energy security, with total production from KGD6 block rising to around 30 MMSCMD in the coming months, the company said.

"The process of demerger of the financial services business—Jio Financial Services Ltd.—is on track with key approvals in place. I firmly believe that Jio Financial Services is uniquely positioned to foster financial inclusion in India,” Ambani said.

O2C Segment

The O2C segment revenue in Q1 FY24 fell by 17.7% YoY to Rs 1,33,031 crore, or $16.2 billion, primarily on account of a sharp reduction in crude oil prices and lower price realisation of downstream products. However, this was partially offset by higher volume.

The O2C operating profit for the period was down 23.2% YoY to Rs 15,271 crore, or $1.9 billion, led by fall in transportation fuel cracks and lower downstream chemical margin, the company said.

The overall demand was impacted by destocking on recessionary fears and high interest rates as well as slower than expected ramp-up in China markets, the company said.

The year-on-year comparisons are skewed due to historic high fuel cracks in Q1 FY23, with dislocation in energy markets, it said.

Oil & Gas

The oil and gas segment had a strong quarter with segment revenue rising 27.8% YoY on higher gas price realisation and increase in KGD6 volume with start-up of oil and condensate production from MJ fields.

The average price realised for KGD6 gas was $10.81 per million metric British thermal unit in Q1 FY24 versus $9.72 per MMBTU a year ago. The average price realised for the coal bed methane gas was $14.15 per MMBTU for the quarter versus $22.48 per MMBTU a year ago.

Segment Ebitda rose 46.7% YoY to Rs 4,015 crore, while the operating margin was up 120 basis points year-on-year to 86.7%.

The company expects to complete and connect one remaining well out of seven in the MJ field by Q2 FY24. The production from the MJ field started post commissioning and the first cargo of about 5,00,000 barrels of condensate was sold in the first quarter of FY24, the company said.

The current rate of condensate production is around 17,000 barrels of oil per day.

“During the quarter, two e-auctions for sale of 6 MMSCMD and 5 MMSCMD gas from KGD6 were undertaken,” the company said. “The entire volume was placed, and gas sale purchase agreement signed with successful bidders across key sectors like CGD, fertilisers, steel and refineries among others,” it said.

According to the company, with incremental gas production from MJ field, along with ongoing production from R Cluster and Satellite Cluster fields, the production from the KGD6 block will increase to 30 MMSCMD in the coming months from 27 MMSCMD at present.

Reliance Jio Platforms

Jio Platforms Ltd., the holding company of Reliance Jio, rose 12.5% YoY to Rs 5,098 crore in Q1 FY24, on the back of higher revenue that increased 11.3% year-on-year to Rs 30,640 crore.

The company's operating profit rose 14.8% over the year ago period to Rs 13,116 crore.

Operationally, Jio continued to lead the industry’s net subscriber addition with 9.2 million additions in Q1 FY24. The monthly churn also reduced to 1.8% during the quarter.

The company said that its average revenue per user rose 2.8% YoY to Rs 180.5, driven by better subscriber mix and ramp-up of wireline business.

The 5G adoption and fiber-to-home ramp-up drove strong 28.3% YoY growth in data usage, as monthly data traffic on Jio network crossed 11 exabytes during Q1 FY24.

Retail

The segment revenue rose 19.5% year-on-year to Rs 69,948 crore led by growth in grocery, consumer electronics (excluding devices) and fashion and lifestyle businesses.

The segment profit crossed a new milestone as Ebitda rose 33.9% YoY to Rs 5,139 crore.

During the quarter, the company opened 555 new stores. The quarter also recorded the highest ever footfalls at 249 million across formats.

Digital commerce and new commerce businesses continued to grow and contributed 18% of revenue.

“Towards the end of the quarter, completed Metro Cash and Carry India acquisition and initiatives are underway to integrate the business with Reliance Retail,” the company said.

On Friday, shares of RIL closed 3.19% lower on the BSE, as compared with a 1.31% drop in the benchmark Sensex.

(Updates an earlier version to change profit for the period to net profit attributable to owners, a more widely tracked metric)