Reliance Industries Q3 Report: Jio and Retail Succeed, O2C Revenue Drops; Key Takeaways from RIL's Earnings

Reliance Industries Q3 Report:Reliance Industries Posts Solid Q3FY24 Figures: Telecom and Retail Drive Revenue and EBITDA Growth

Reliance Industries (RIL) released its financial results for the December quarter of the current fiscal year (Q3FY24) on Friday, January 19. The company reported favorable figures, with notable contributions from its telecom and retail segments towards overall revenue and EBITDA. However, the Oil-to-Chemicals (O2C) sector experienced a decline in revenue due to lower price realization influenced by a drop in average Brent crude oil prices.

Despite this, the oil and gas segment saw a significant increase in revenue, primarily attributed to higher volumes, partially offset by a decrease in gas price realization from the KG D6 field. RIL announced in a media release that its consolidated profit after tax (PAT) for the quarter grew by 10.9% year-on-year (YoY) to ₹19,641 crore. In the same quarter of the previous year, the company's PAT stood at ₹17,706 crore, adjusted to account for the demerger of the financial services business.

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The gross revenue for the quarter increased by 3.2% YoY to ₹2,48,160 crore, driven by sustained growth in consumer businesses. The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the quarter witnessed a substantial YoY jump of 16.7%, reaching ₹44,678 crore. Additionally, the EBITDA margin improved by 210 basis points to 18%. Overall, the company reported a positive financial performance for the quarter.

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During the December quarter, Reliance Industries (RIL) announced a capital expenditure of ₹30,102 crore (equivalent to $3.6 billion). This expenditure was directed towards various strategic initiatives, including the nationwide rollout of 5G technology, the expansion of retail infrastructure, and the development of new ventures in the energy sector. It's important to note that this figure does not include expenses related to spectrum, and it has been adjusted for capital advances and the regrouping of assets, as clarified by the company. In essence, RIL is actively investing in key areas to enhance its capabilities and stay at the forefront of technological and business advancements.

Impressive Expansion in Jio Platforms

According to the company's latest report, Jio Platforms demonstrated a noteworthy performance with an 11.3% year-on-year growth in revenue from operations, reaching ₹27,697 crore. The net profit also experienced a substantial 11.6% increase, totaling ₹5,445 crore.

The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for this segment saw a notable growth of 11.5%, amounting to ₹13,955 crore. This positive trend was attributed to higher revenue and an improvement in margins. The EBITDA margin, in particular, showed a modest growth of 10 basis points year-on-year, reaching 50.4%, as highlighted by RIL.

The company emphasized that Jio's operating revenue growth was fueled by a robust increase in subscribers across both mobility and homes. Additionally, the improvement in Average Revenue Per User (ARPU) played a significant role in driving revenue. The ARPU witnessed a 2% year-on-year increase, reaching ₹181.7. However, this growth was partially offset by the unlimited data allowance provided on the 5G network.

Despite this offset, engagement on the Jio network remained strong, with a remarkable 31.5% increase in total data traffic and a 7.9% increase in voice traffic year-on-year, according to the company's statement. Overall, these results reflect Jio Platforms' sustained growth and its ability to adapt to evolving market dynamics.

Retail Ventures Limited (RRVL) Thrives with Growth in Grocery, Fashion, Lifestyle, and Consumer Electronics

According to Reliance Industries' exchange filing, Reliance Retail achieved a robust performance in Q3FY24, reporting a significant 22.8% year-on-year increase in gross revenue, amounting to ₹83,063 crore. This growth was primarily driven by the successful performance of its grocery, fashion and lifestyle, and consumer electronics businesses.

The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the segment reached ₹6,258 crore, reflecting a notable 31.1% year-on-year increase. Furthermore, the EBITDA margin from operations on net sales witnessed a 40 basis points year-on-year rise, reaching 8.1%.

Reliance Retail expanded its physical presence during the quarter by opening 252 new stores, bringing the total store count to 18,774 stores, covering an area of 72.9 million square feet. Impressively, the quarter recorded footfalls of over 282 million across various formats, demonstrating a substantial 40.3% year-on-year growth.

The company highlighted that its digital commerce and new commerce businesses sustained growth and collectively contributed to 19% of the total revenue. This emphasizes the diversified and thriving nature of Reliance Retail's operations, encompassing both physical and digital platforms. Overall, the results showcase the successful expansion and performance of Reliance Retail in various consumer-focused segments.

Revenue from Oil-to-Chemicals (O2C) Experiences a Decline

Reliance Industries Limited (RIL) disclosed that its revenue from the Oil-to-Chemicals (O2C) segment experienced a 2.4% year-on-year decline, totaling ₹1,41,096 crore ($17.0 billion) in Q3FY24. This reduction was primarily attributed to a 5.3% year-on-year decrease in average Brent crude oil prices, leading to lower price realization.

Despite the decline in revenue, the O2C segment's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) witnessed a marginal 1% year-on-year increase, reaching ₹14,064 crore ($1.7 billion). This growth was driven by higher gasoline cracks and advantageous feedstock sourcing. However, it was partially offset by lower downstream chemical margins and the impact of planned maintenance and inspection shutdown.

The company explained that the planned maintenance and inspection shutdown of key units, including CDU, FCCU, delayed coking, and the ROGC complex, had an adverse effect on yields and profitability. It was further noted that if all major units were operational during the quarter, the O2C segment's EBITDA would have been higher both on a year-on-year basis and comparable on a quarter-on-quarter basis. Overall, the results reflect the impact of external factors on the O2C segment's performance, coupled with internal operational challenges during the specified period.

Strong Growth in Oil and Gas Exploration and Production (E&P) Revenue

According to the recent disclosure from Reliance Industries Limited (RIL), the revenue from exploration and production (E&P) exhibited a robust growth of 50.2% year-on-year in the quarter under review. This increase was primarily driven by higher volumes, although it was somewhat mitigated by a reduction in price realization from the KG D6 Field.

The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the E&P segment showed a substantial year-on-year surge of 49.6%, amounting to ₹5,804 crore. Despite this positive growth, the EBITDA margin for the quarter stood at 86.4%, experiencing a slight 30 basis points decrease compared to the same period last year.

The company's report indicates that the strong performance in E&P revenue was primarily attributed to increased production volumes, even though lower prices from the KG D6 Field impacted overall revenue realization. The EBITDA figures underscore the segment's profitability, with the margin remaining high despite a slight decline compared to the previous year. Overall, the results reflect a robust quarter for the Oil and Gas Exploration and Production segment of Reliance Industries.

Varied Performance in Media Business

The revenue from operations for the media business segment witnessed a 4.1% year-on-year decline, totaling ₹1,774 crore. This dip was primarily attributed to reduced Movie Studio revenue during the quarter.

The Consolidated Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) experienced a decline, primarily due to Viacom18's strategic investments in growth verticals such as Sports and Digital. Despite this, both these segments are anticipated to be significant revenue drivers in the future, requiring present investments to establish a robust consumer proposition.

Reliance Industries Limited (RIL) noted that the TV News business demonstrated substantial improvement in profitability, propelled by strong revenue growth. Specifically, the revenue for the TV News business saw a remarkable 23% year-on-year increase, fueled by robust growth in advertising revenue across clusters.

Additionally, the Digital News business exhibited a commendable 20% growth in revenue, driven by Intellectual Property (IP) events and video monetization across digital platforms. The results indicate a mixed performance in the media business segment, with challenges in the Movie Studio revenue offset by positive trends in TV News and Digital News revenue streams.