Telecom was the outperforming segment and it saw exceptional growth during the quarter led by increased usage of telephony. The media business also improved performance. Retail remained resilient, by company’s own admission, but still felt the impact of the pandemic.
Petrochemical, refining and oil & gas business also performed handsomely, but showed some chinks in the armour as gross refining margin shrank, as did margins for many petrochemical products. These businesses, historically, have been the cash cow for the company.
A sharp drop in debt levels was also another highlight of the quarter
Here are the key takeaways from RIL’s Q2 earnings:
How was the overall performance?
The company reported a 15.05 per cent year-on-year (YoY) drop in consolidated net profit at Rs 9,567 crore while revenue from operations fell 24.24 per cent YoY to Rs 1.16 lakh crore. Ebitda before exceptional items for the quarter stood at Rs 23,299 crore ($3.2 billion), which was 7.9 per cent higher QoQ.
What are the key highlights of Jio’s earnings?
- Arpu came in at Rs 145 per subscriber per month, more than Rs 140.3 reported for last quarter but less than Rs 162 Airtel reported for Q2.
- Total customer base rose to 405.6 million — becoming the only company outside China to clock the 400 million mark in a single market.
- Jio customers used 1,442 crore GB data this quarter, and talked for 93,223 crore minutes
- Net profit jumps 185 per cent You to Rs 3,020 crore
How did the retail business perform?
- Revenue came in at Rs 41,100 crore, up 30 per cent from last quarter; Ebitda at Rs 2,006 crore
- Firm says store footfalls still significantly lower than pre-Covid levels; 15 per cent stores still closed
- Company added 232 stores during the quarter, taking total count to 11,931 stores
How was the growth in
petchem & refining business?
- Petrochemicals Ebitda for Q2 increased 34.6 per cent QoQ to Rs 5,964 crore; margin up 250 bps to 20.1 per cent
- PP margins down 21 per cent ($126/MT); PE margins stable ($478/MT); PVC margins up 14 per cent ($546/MT); PTA margins down 14 per cent ($107/MT); PX-Naphtha margins down 37 per cent ($136/MT)
- GRM came down further to $5.7/bbl from $6.3/bbl last quarter
- Indian oil product improved 11.3 per cent QoQ; led by diesel (5.3 per cent), petrol (41.1 per cent) and air fuel (107.4 per cent).
- Revenues increased by 33.3 per cent QoQ to Rs 62,154 primarily due to higher crude oil price; EBITDA down 21.4 per cent to Rs 3,002 crore
- Oil & gas revenues fell 29.8 per cent QoQ to Rs 355 crore
How did its media business stack up?
- Revenues rose by 31.5 per cent QoQ; Ebitda at 166 crore
- Operating margins continued to improve, as broadcasting margins rose sharply, and digital news business swung into profitability
- TV viewership now settled at 1.1 times pre-Covid levels
What is the update on debt payment?
The company said it pre-paid Rs 54,198 crore worth of long term debts that reduced its debt to equity ratio to 0.46 from 0.75 in the previous quarter and 0.72 in the same quarter last year. At the group level, total non-convertible debentures of the company outstanding were Rs 73,080 crore out of which, secured nonconvertible debentures were Rs 13,351 crore. The Group has total outstanding commercial papers amounting to Rs 53,911 crore. Finance cost stood at Rs 6,084 crore ($825 million) against Rs 6,735 crore reported for the trailing quarter.
Any update on acquisition of Alok Industries?
During the quarter, the company along with JM Financial Asset Reconstruction Company Limited acquired joint control over Alok Industries and their shareholding in Alok Industries Limited is 40.01 per cent and 34.99 per cent, respectively, aggregating to 75 per cent.
What did the management say?
“We delivered strong overall operational and financial performance compared to previous quarter with recovery in petrochemicals and retail segment, and sustained growth in Digital Services business. Domestic demand has sharply recovered across our O2C business and is now near pre-Covid level for most products. Retail business activity has normalised with strong growth in key consumption baskets as lockdowns ease across the country,” said Mukesh Ambani, Chairman and Managing Director, Reliance Industries. “With large capital raise in the last six months across Jio and Retail business, we have welcomed several strategic and financial investors into the Reliance family. We continue to pursue growth initiatives in each of our businesses with a focus on the India opportunity.”
How did analysts view these numbers?
Abhijit Bora, Sharekhan: The results were above estimates driven by strong performance in the petchem segment. Retail business Ebitda was also above expectation. Jio’s numbers were in line. However, GRM was below Street expectation. Overall, a very good set of numbers. Overall, the stock will go up, especially after the correction. We will likely not revise the target on the scrip and maintain it at Rs 2,400.