scorecardresearchResults Review: Reliance industries became first Indian company to cross $100 bn revenue; What's next?
Reliance became the first Indian company to cross $100 billion in sales revenues..
Reliance became the first Indian company to cross $100 billion in sales revenues..

Results Review: Reliance industries became first Indian company to cross $100 bn revenue; What's next?

Updated: 09 May 2022, 02:42 PM IST
TL;DR.

Reliance reported the highest-ever quarterly EBITDA of 33,968 crore, up 28 per cent year-on-year. Reliance also became the first Indian company to cross $100 billion in sales.

Mukesh Ambani-owned Reliance Industries Limited (RIL) on Friday posted a consolidated profit after tax (PAT) at 16,203 crore, up 22.5 per cent in the quarter ended March 31, 2022. It had posted a net profit of 13,227 crore in the year-ago period.

Reliance has four business verticals: O2C, which includes its oil refineries, petrochemical plants, and fuel retailing business; retail, which includes brick-and-mortar stores and e-commerce; digital services, which includes telecom arm Jio; and new energy.

Sequentially, the company's profit declined 12.6 per cent in the March quarter from 18,549 crore in the previous December quarter, breaking a six-quarter chain of quarter-on-quarter improvement.

RIL's revenue from operations has come in at 2,11,887 crore, up from 1,54,896 crore in the same quarter last fiscal.

Reliance became the first Indian company to cross $100 billion in sales revenues.

For the full fiscal 2021-22 (April 2021 to March 2022), Reliance reported a net profit of 60,705 crore on a revenue of 7.92 lakh crore (USD 102 billion).

The firm reported the highest-ever quarterly EBITDA (earnings before interest, taxes, depreciation and amortisation) of 33,968 crore, up 28 per cent year-on-year.

What is EBITDA
What is EBITDA

The Russian-Ukraine conflict accelerated an already tight demand-supply situation for crude oil-petroleum products, leading to higher cracks or margins on petrol and diesel.

Further, Reliance Jio reported a 24 per cent rise in standalone net profit at 4,173 crore for the quarter ended March 31, 2022. It had reported a net profit of 3,360 crore in the year-ago period.

For the financial year ended March 31, 2022, Reliance Jio's consolidated net profit increased by about 23 per cent to Rs14,854 crore.

The company's average revenue per user, or ARPU, during the quarter, came in at 167.6 per subscriber per month, up 21.3 per cent growth on a Y-o-Y basis and 10.5 per cent growth on a Q-o-Q basis.

It had a customer base of 410 million, down from 421 million in the previous quarter, mainly driven by SIM consolidation.

Reliance Retail Ventures Ltd.’s EBITDA rose 2.4 per cent to 3,705 crore as demand improved across categories. In the third quarter, net profit from retail fell by 4.8% to 2,139 crore.

The board also recommended a dividend of 8 per equity share of 10 each for the financial year ended March 31, 2022.

Financials

Quarterly Financials (Consolidated) ( Cr) Mar-2022Dec -2021Sep - 2021Jun -2021Mar- 2021
Total Revenue2,11,8871,95,3181,78,3281,48,5911,54,896
Operating Expenses 1,80,5211,61,5651,48,0841,21,0041,31,545
Operating Profit31,36629,70626,02023,36823,351
Interest3,5563,8123,8193,3974,044
Profit Before Tax22,26625,09419,19517,30716,368
Tax4,3904,6883,7553,4641,387
Net Profit16,20318,54913,68012,27913,227
Basic EPS (Rs) 23.928.120.91920.5

Crisis led Opportunity

Russia’s invasion of Ukraine has opened arbitrage opportunities so enticing that Reliance Industries Ltd. deferred maintenance work at the world’s biggest oil refining complex to churn out more diesel and naphtha after prices surged.

Reliance Industries is buying discounted cargoes of crude after self-sanctions on Russian fuels by some European Union companies pushed up margins on some oil products to three-year highs, Bloomberg reported. 

According to Reuters calculations based on information from crude tenders and traders shows that Indian refiners have placed orders for at least 40 million barrels of Russian oil since the invasion on Feb. 24. The purchases are for loading in the June quarter.

Reliance has ordered at least 15 million barrels of Russian oil since Russia invaded Ukraine in February. 

Before the Ukraine war, Indian refiners, including Reliance, rarely bought Russian oil owing to high freight costs.

Refinitiv's tanker flow data shows a supply of about 8 million barrels of Russian oil, mainly the Urals, at the Reliance-operated Sikka port in western India, for arrival between April 5 and May 9, the Reuters data shows. Most of these barrels are supplied by Russian trader Litasco.

Traders told Reuters that Reliance is buying Russian oil on a delivered basis.

Reliance is scheduled to receive its first parcel of Russia's ESPO oil in early May. This grade is mostly supplied to China.

The company operates two refineries at the Jamnagar complex in western India that can process about 1.4 million barrels per day (bpd) of oil daily.

Expect a Rise in Natural Gas Prices

Reliance also expects prices of natural gas in India to rise again in October as its gas exploration business reaps the rewards of a global surge in energy prices that have already pushed the rates to a record high.

The government sets gas prices every six months based on international rates. The price of gas from old or regulated fields was more than doubled to a record USD 6.1 per mmBtu from April 1 and that for difficult fields like those lying in deepsea to USD 9.92. per mmBtu. Rates are due for a revision in October.

Data from the various media reports shows that Reliance and its partner bp plc of UK produce about 18 million standard cubic meters per day of gas from two sets of new fields in the eastern offshore deepsea block KG-D6. The higher gas prices have helped the company's EBITDA from the oil and gas exploration and production business to climb to a seven-year high.

On price hike effected from April 1, Morgan Stanley had last month stated that Reliance may get a $1.5 billion ( 11,500 crore) rise in its annual earnings from the more than doubling of the price of natural gas it produces.

Stock Performance

Reliance Industries' share price fell over 4% on Monday's trade. The stock hit an intraday low of 2,520 apiece on the BSE.

The stock has rallied 6% so far this year. Further, over the past five years, the market price of the stock has zoomed by 297.15 per cent, as compared to a 105 per cent surge in the Sensex.

Stock price movement of RIL
Stock price movement of RIL

Outlook

ICICI Securities said that while EBITDA/EPS CAGR of 25%/29% over FY22-FY24 remains peer-leading, but they continue to believe there is limited upside for the Reliance due to - stronger Capex momentum to further push back FCF generation and dampen return ratios and already strong multiples factored in Current market price and a limited signs of a return of capital to shareholders.

ICICI Securities reiterated the "ADD" rating with a target price of 2,865/share ( 2,960/Share earlier), implying an upside of 14% from the current price.

ICICI Securities has raised FY23E/FY24E GRM estimates for RIL by US$1/bbl for each year, on the back of continued strength in product spread seen in April 22 and forecast the same.

Further, it expects the share of retail and digital services in consolidated EBITDA to remain at 44-46% over FY23E - FY24E.

Motilal Oswal on the other hand expects Reliance Industries' earnings trajectory will improve over the next 12 months driven by strength in refining, and hike in telecom tariffs and strong growth in the retail business.

The brokerage valued RIL's Standalone segment at 7.5x, telecom at 17x FY24E, and retail at 31x FY24E EV/EBITDA, it had given a 'BUY' recommendation with a target price of 2,800/Share, an upside of 11% from CMP.

An average of 34 analysts polled by MintGenie have a 'buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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First Published: 09 May 2022, 02:42 PM IST