Reliance’s refining margin shrinks; petchem becomes largest cash flow generator

The traditional crude refining business of Reliance Industries (RIL), India’s largest private company by revenues, has been hit by declining margins in the first quarter, leading to 16.8 per cent fall in refining earnings before interest and tax (EBIT) to Rs 5,315 crore.

The gross refining margin (GRM) of the company fell to $10.5 a barrel from $11.9 a barrel in the first quarter of the last financial year.

“Lower crude throughout due to planned turnaround of one crude distillation unit and softer refining margins led to decline in segment EBIT. Refining and marketing performance was also impacted by higher flat price and adverse movement in Brent-Dubai differentials on Y-o-Y basis,” the company said.

The spike in petrochemical volume – RIL spent about Rs 1.5 lakh crore for the expansion of its petrochemical facilities in Jamnagar – has offset the slip in crude margins.

The petchem business has become the largest vertical in terms of cash flow for the first time, overtaking the refining business of the company.

The revenue from petrochemicals segment increased by 58.2 per cent to Rs 40,287 crore, thanks to 35 per cent jump in volumes and about 24 per cent higher realisations.

The segment EBIT witnessed record rise of 94.9 per cent to Rs 7,857 crore, supported by the newly built world’s largest Refinery Off-Gas Cracker (ROGC), its downstream units and Para-xylene (PX) plant.

While its hydrocarbon exploration and production continues to be in shambles, the new businesses like Reliance Retail and Reliance Jio have shown signs of becoming the formidable force in their respective industries.

The retail revenues grew by 123.7 per cent to Rs 25,890 crore – over 100 per cent growth for the third consecutive quarter. PBDIT grew by 203 per cent to Rs 1,206 crore. Reliance Retail added 68 stores and 794 Jio Points during first quarter and operates 8,533 stores and 502 petro outlets across 5,200 cities.

Reliance Jio’s subscriber base grew to 215.3 million at the end of the first quarter – a net addition of 28.7 million during the quarter, compared to 26.5 million in the previous quarter. The standalone revenue from operations grew by 13.8 per cent to Rs 8,109 crore, while EBITDA rose 16.8 per cent to Rs 3,147 crore.

The biggest advantage of the nearly two-years-old digital services firm is the EBITDA margin of 38.8 per cent. Jio posted a net profit of Rs 612 crore in first quarter, higher compared to Rs 510 crore profit in the fourth quarter of the last financial year.

source: businesstoday