Reliance Industries Ltd reported a 13% drop in its profit for the January-March period as the US-Israel-Iran war weighed on the company’s key oil-to-chemicals (O2C) segment even as contributions from telecom and retail segments remained resilient.
India’s most valuable company reported a consolidated profit of ₹16,971 crore, marginally above the consensus estimate of ₹16,944 crore of six analysts polled by Bloomberg. Consolidated revenue grew 13% year-on-year (y-o-y) to ₹2.99 trillion.
However, earnings before interest, taxes, depreciation and amortization (Ebitda) declined marginally to ₹48,588 crore.
“The numbers are weaker than expected and the main disappointment was the segment,” said Harshraj Aggarwal, executive vice president-institutional equity research at Yes Securities. “Telecom and retail performance was more or less in line with expectations.”
The company’s oil refining business was plagued by higher crude prices and expensive shipping and insurance costs due to the war. Higher fuel cracks—the margins the company makes from refining crude into fuel—helped offset some impact of the high input costs.
Revenue from the O2C segment grew 12% year-on-year on the back of higher fuel prices to ₹1.85 trillion. However, Ebitda for the segment fell by just under 4% to ₹14,520 crore.
But there is a silver lining. Analysts at JP Morgan estimated that Reliance’s gross refining margins (GRM)—the money the company makes on refining every barrel of oil—has gone up to highs of $40-50 due to the war-related volatility compared to the long term average of $5-10, improving future earnings prospects.
The war in Iran was partly responsible for the O2C segment’s poor performance, Aggarwal said. Another possible reason could be unavailability of distressed crude oil, he said. O2C was impacted due to higher prices and fuel costs, freight rates, and insurance costs.
Lastly, Reliance diverted liquified petroleum gas () to priority sectors due to the war instead of its downstream chemicals business, further impacting margins, he said.
Incomes from Reliance’s telecom and retail businesses remained robust. Jio, the country’s largest telecommunications company, added 9.1 million customers during the quarter to reach 525.4 million subscribers. Reliance Retail added 181 stores to reach 20,160 stores.
Jio Platforms Ltd, the group’s telecommunications and digital arm, reported revenues of ₹38,259 crore, up 13% compared to last year. Ebitda expanded by a healthy 18% to ₹20,060 crore. Ebitda margins expanded 2.3 percentage points to 52.4%
Average revenue per user ()—a key metric in the telecom sector—was up by 4% to 214.
Reliance Retail’s revenue grew 11% y-o-y to ₹87,344 crore, while Ebitda grew 3% to ₹6,921 crore. Net profit grew marginally to ₹3,563 crore.
Shares of Reliance Industries Ltd ended 1.15% lower on the BSE on Friday at ₹1,327.65. The benchmark Sensex closed the session 1.29% lower. The results were announced after market hours.