At the aggregate level, margins climbed nearly 4 percentage points due to more than 30% revenue growth in oil-to-chemicals (O2C), exploration and retail segments that together account for 81% of the revenue and two-thirds of operating profit at the conglomerate. This helped RIL beat the consensus operating profit forecast. RIL achieved 53% of the expected operating profit for the full fiscal in the first half – an important parameter for analysts to revise their earnings upwards.
The energy vertical that includes O2C and exploration has supported earnings growth, thanks to a sharp improvement in the Singapore gross refining margin, the regional benchmark to gauge refinery profitability, and superior realisation in the gas business.
The Singapore GRM rose $5.5 per barrel to $9.6 on a sequential basis in the September quarter, driven by better realisation of petroleum products. Consequently, the operating profit of the O2C segment rose by 36% YoY to ₹16,281 crore, while exploration revenue rose 72% on higher gas production and prices.
The current level of refining margin may sustain owing to recent under-capacity, leading to a structurally tight refining system. So, the upcycle in the refining segment may continue albeit with some quarterly volatility. On the petrochemical side, prices appear to be bottoming out and investors are starting to pay for the chemical repair cycle. With global investors’ focus back on the energy sector and RIL having exposure to the refining and chemical segments, it might start attracting investors’ mind share soon.
The retail segment, which has seen a small amount of monetisation in the last two months from two marquee funds has continued to show robust growth. Revenue touched a record high of ₹77,148 crore in the September quarter. If the company can maintain the current quarterly revenue rate, it is all set to touch ₹3 lakh crore of topline for the full fiscal. Fashion and lifestyle, and grocery businesses have been the biggest drivers with an expansion of more than 32%, followed by consumer electronics which expanded 11%.
In the telecom business, Jio net added 11 million subscribers in the September quarter- the highest in eight three-month periods – taking the tally to 459.7 million subscribers. India’s largest telco has been able to expand ARPU by 2.5% YoY to ₹181.7. Jio Platforms’ revenue grew 11% to ₹31,537 crore.
The RIL stock has had a circumspect run in 2023 over concerns of high gearing. However, net debt has started stabilising while energy earnings are climbing. This may allay investor apprehensions. Outstanding gross debt has dropped to ₹2.95 lakh crore in September 2023, compared with ₹3.18 lakh crore in the previous quarter.
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