Reliance Industries Surpasses Q2 Profit Estimates on Strong Telecom and Retail Growth

Reliance Industries Limited (RIL), India’s most valuable company, has reported a notable rise in its fiscal second-quarter net profit, reflecting robust growth in its telecom and retail segments. The company’s net profit for the quarter ending September 30, 2024, surged by 9.4% from the previous quarter, reaching ₹16,563 crore. This performance exceeded analysts’ expectations and highlighted the resilience of RIL’s diversified business model amid varying market conditions.

Strong Revenue Performance

RIL’s revenue from operations for the quarter stood at ₹2.35 lakh crore, a slight decrease from ₹2.36 lakh crore in the preceding three months. Analysts had predicted a decline, expecting the revenue to fall marginally to ₹2.31 lakh crore due to challenging market dynamics. Net profit was also anticipated to drop by 12%, with expectations set around ₹15,354 crore. However, RIL’s actual results defied these forecasts, showcasing the company’s ability to navigate the complexities of the market.

Mukesh Ambani, Chairman and Managing Director of RIL, Reliance Industries attributed this success to the robust growth in the Digital Services and Upstream business, which helped counterbalance the weaker contributions from the Oil-to-Chemicals (O2C) sector. “Our performance reflects robust growth in Digital Services and Upstream business. This helped partially offset weak contribution from O2C business, which was impacted by unfavorable global demand-supply dynamics,” he stated.

Telecom Business Performance

A significant contributor to RIL’s impressive quarterly results was its telecom unit, Jio. The company reported that its average revenue per user (ARPU) grew by an impressive 7.4% year-on-year, reaching ₹195.1. The full impact of the recent tariff hikes is expected to materialize in the next two to three quarters, further enhancing revenue generation from this segment.

Jio Platforms, which encompasses RIL’s digital services, reported a record quarterly profit of ₹6,536 crore, driven by strong subscriber growth and increased ARPU. The company’s subscriber base reached approximately 479 million as of September 30, 2024, reflecting a 4.2% increase. Jio’s strong performance was complemented by its leadership in the 5G market, with 148 million subscribers upgrading to the faster service. This segment is responsible for 34% of wireless data traffic for Jio, showcasing the growing demand for high-speed connectivity.

Akash M Ambani, Chairman of Reliance Jio Infocomm, emphasized Jio’s commitment to innovation, stating, “Right from inception, Jio has focused on deep tech innovation to create customer and shareholder value.” The introduction of Jio True5G and JioAirFiber has transformed India’s digital landscape, with Jio rapidly increasing its home connection base to approximately 2.8 million homes.

Retail Sector Growth

Reliance Retail Ventures also reported strong performance during the quarter, with a profit after tax of ₹2,935 crore, marking a nearly 20% increase from the previous quarter. Revenue from operations for the retail unit rose to ₹66,502 crore, up from ₹66,260 crore in the prior three months. The retail segment’s growth was attributed to the expansion of consumer touchpoints and product offerings across both physical and digital channels.

Ambani noted that the unique omni-channel retail model has allowed the business to cater to a wide range of customer needs. “Reliance Retail continues to make investments in technology and infrastructure to build a strong foundation for future growth and maintain market leadership,” he stated. The company opened 464 new stores during the quarter, bringing the total number of stores to 18,946, and witnessed a footfall of 297 million across all formats, reflecting a 14% year-on-year growth.

Dinesh Taluja, CFO and Corporate Development Officer of Reliance Retail, expressed optimism for the upcoming festive season, stating, “We are seeing very strong growth in the first two weeks of October as the festival season has started kicking in. We expect this momentum to continue through Diwali.”

Oil-to-Chemicals (O2C) Business Overview

While RIL celebrated growth in its telecom and retail sectors, its Oil-to-Chemicals (O2C) business faced challenges. Revenue for this segment grew by 5.1% to ₹1.55 lakh crore compared to the same period last year. However, the EBITDA for the September quarter fell to ₹12,413 crore from ₹16,277 crore in the previous year due to unfavorable demand-supply dynamics.

Venkatachari Srikanth, CFO of RIL, explained that the O2C business experienced a significant decline in transportation fuel cracks, down by 50%, due to weak global demand and increased supply from Africa and other regions. He pointed out that the overall oil demand is expected to decrease to less than 1 million barrels per day (bpd) in 2024 and 2025, contrasting with a growth of 2.1 million bpd in 2023.

Despite the challenges, Srikanth remains optimistic about potential recovery, especially with the onset of the festive season in India, which is expected to boost downstream demand. Furthermore, he indicated that stimulus measures in China could improve downstream margins in the O2C segment.

Oil and Gas Business Highlights

RIL’s oil and gas segment also reported strong performance, with a record quarterly EBITDA of ₹5,290 crore, reflecting an 11% increase from the previous year. Revenue from this segment was ₹6,222 crore, slightly lower than the previous year’s figure of ₹6,620 crore, mainly due to lower price realization. However, increased gas and condensate volumes from the KG D6 and CBM fields partly offset this decline.

The average price realized for KG D6 gas during the quarter was $9.55 per MMBTU, compared to $10.46 per MMBTU in Q2 FY24. Despite lower price realizations, the increase in production volumes underscores RIL’s commitment to expanding its oil and gas operations.

Media Business Performance

RIL’s,Reliance Industries media business also contributed positively, reporting a revenue growth of 6%, driven primarily by digital segment advertising revenue. The media segment generated revenue from operations of ₹1,825 crore in the September quarter, reflecting the growing demand for digital advertising.

Conclusion

Overall, Reliance Industries showcased strong performance across its diversified portfolio in the second quarter of FY2024, surpassing profit estimates and demonstrating resilience in its telecom and retail sectors. While challenges remain in the O2C business, the company’s strategic focus on digital services, innovation, and consumer engagement positions it well for continued growth. With the festive season approaching and ongoing investments in technology and infrastructure, Reliance Industries is poised to navigate future market dynamics effectively.