Higher GRM Lifts RIL Bottomline: 10 Takeaways From Q1 Earnings

Higher GRM Lifts RIL Bottomline: 10 Takeaways From Q1 Earnings

Mukesh Ambani-led Reliance Industries (RIL) on Thursday reported better-than-expected earnings for June quarter, thanks to a rise in gross refining margin (GRM). However, net profit came in line with market expectations.

Shares of the company closed 0.30 per cent down at Rs 1,528 on Thursday before the earnings numbers, whereas benchmark BSE Sensex settled 50.95 points, or 0.16 per cent, down at 31,904.

Here are the top takeaways from RIL’s first quarter earnings:

Net profit: The company reported 8.59 per cent year-on-year (YoY) rise in standalone net profit at Rs 8,196 crore for the quarter against Rs 7,548 crore reported for the corresponding quarter last year. Analysts in an ETNow poll had projected a bottom line figure of Rs 8,300 crore. Consolidated profit jumped 28.28 per cent YoY to Rs 9,079 crore thanks to a major boost from the retail segment. The number compared with Rs 7,077 crore consolidated profit posted for the year-ago quarter.

Revenues: The topline number jumped 18.39 per cent YoY to Rs 70,434 crore from Rs 59,493 crore in the same quarter a year ago. Consolidated revenue from operations increased 26.71 per cent YoY to Rs 90,537 crore. Robust growth in retail business, which posted a 73.6 per cent increase in revenue at Rs 11,571 crore, helped the consolidated figure. Brent crude oil price averaged $ 49.9 per barrel in Q1 of FY18 compared with $45.6 a barrel in the corresponding period of previous year.

GRM: Gross refining margin (GRM), the difference between crude oil price, a major raw material, and average selling price of refined products, came in at $11.9 a barrel for the quarter, compared with $10 a barrel that analysts had projected in the ETNow poll. RIL’s GRM outperformed Singapore complex margins by $5.5a barrel. Marginally weaker product cracks environment on QoQ basis was offset by yield shift and robust risk management. Further, favourable Brent-Dubai differential aided crude sourcing during the quarter.

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KG-D6 field produced 0.23 MMBBL of crude oil and 20.4 BCF of natural gas in Q1, a reduction of 20 per cent and 27 per cent respectively on a YoY basis. Condensate production in 1Q FY18 was at 0.03 MMBBL. Fall in oil and gas production was mainly on account of natural decline coupled with water and sand ingress resulting in shut in of wells. At present, 8 wells in D1D3 and 3 wells in MA is under production.

EBITDA: Operating profit grew 6.64 per cent YoY to Rs 12,719 crore from Rs 11,926 crore in Q1FY17. Strong refining and petrochemicals margin environment contributed to higher operating profits for the quarter.

New investment plans: RIL announced plans to invest Rs 413 crore in Balaji Telefilms. The company will get 2.52 crore shares at Rs 164 a share and have two board seats in Balaji Telefilms. The company is also planning to invest $25 million in technology incubator JII.

From the desk of Mukesh Ambani: Our industry- leading portfolio of assets in the refining and petrochemicals business contributed to considerable improvement in our earnings for the quarter. Retail business also witnessed accelerated growth momentum with YoY revenue growth of 74 per cent. Jio has revolutionised the Indian telecom and data consumption landscape. This digital services business has been built to address the entire value chain across the digital services domain with smart applications to make life simple, beautiful and secure.

Employee cost: Employee cost increased by 16.3 per cent at Rs 2,455 crore ($ 380 million) against Rs 2,111 crore reported for the corresponding period of previous year due to increased employee base and higher payouts.

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Other income: The figure stood lower at Rs 2,124 crore against Rs 2,378 crore reported for the corresponding period of the previous year due to lower investible surplus.

Outstanding debt: Outstanding debt as of June 30, 2017 stood at Rs 2,00,674 crore compared with Rs 1,96,601 crore as of March 31, 2017.

Cash and cash equivalents: The figure stood at Rs 72,107 crore as of June 30, 2017 compared with Rs 77,226 crore reported for March 31, 2017. These were in bank deposits, mutual funds, CDs and government bonds and other marketable securities.

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