CMP: ₹1,461

Target: ₹1,750

Reliance Industries reported weaker than expected performance primarily led by weak petrochemical segment. Petrochemical segment was impacted on a q-o-q basis by both lower margins and slightly lower production volumes. Refining segment reported GRM of $8.9/bbl ($7.7/bbl premium over Singapore benchmark) against JMFe of $7.2/bbl on the back of higher diesel slate in the product mix.

We also note that RIL has reported an extraordinary provision of ₹4,267 crore (pre-tax provision of ₹5,140 crore) primarily on account of inventory losses in the O2C segment.

During the quarter, retail segment was impacted by primarily weaker consumer electronics sales while grocery sales reported a 107 per cent y-o-y growth and offset the decline in consumer electronics sales.

Reliance Jio reported strong growth with customer addition of 17.5 million. On a consolidated basis, the outstanding debt as on March 31, 2020, was at ₹3.4-lakh crore while the cash and equivalents are at ₹1.8-lakh crore. RIL has already announced plans to raise ₹1.03-lakh crore in cash and indicated that Jio Platforms is also attracting global investors for a deal similar to Facebook.

RIL also announced plans to carve out O2C business. We continue to remain positive on RIL on the back of net-debt reduction and an improvement in telecom competitive scenario. We maintain ‘buy with TP of ₹1,750.