Reliance's fuel business slips; Jio still in interconnection congestion

The fall of gross refining margin (GRM) at Jamnagar twin refineries by 80 cents and crash of oil and gas production at Krishna Godawari basin and shale gas assets in the US have pulled down the performance of Reliance Industries, India's largest private company by revenues, leading to a marginal rise in profit at Rs 7,506 crore (up by 3.6 per cent) in the December ended quarter.  

The earnings before income and taxes (EBIT) of refining segment went down by 4.3 per cent to Rs 6,194 crore because of lower volumes and decline in GRM to $10.8 a barrel from $11.5-though it outperformed Singapore complex margins by $4.1 a barrel.

The segment's revenue increased by 7.5 per cent to Rs 61,693 crore. The oil and gas segment's revenue fell drastically by 31 per cent to Rs 1,215 crore, thanks to shrinking production and lower price of domestic gas. It made a loss of Rs 295 crore at the EBIT level compared to a profit of Rs 258 crore in the same period of the previous year. The domestic production, mainly at KG D6, was down 24 per cent while share from shale gas in the US fell by 19 per cent.

The petrochemicals segment really helped the behemoth to offset the slip in fuel business. The revenue of petchem increased by 17.8 per cent to Rs 22,854 crore due to increase in prices across polymers and polyester chain. The EBIT increased sharply by 25.5 per cent to Rs 3,301 crore, supported by favorable product deltas and marginal volume growth.

Reliance Retail continued its slow expansion in the quarter, adding 111 stores across formats. The revenues for the third quarter grew by 47.2 per cent to Rs 8,688 crore while the profit before depreciation, interest and tax (PBDIT) increased to Rs 333 crore from Rs 237 crore. At the end of the quarter, Reliance Retail operated 3,553 stores across 686 cities with an area of over 13.25 million square feet.

Another worry for the company is the rising debt because of the 4G business and falling cash reserves on the books. The outstanding debt rose to Rs 194,381 crore from Rs 180,388 crore in the last nine months.

But the cash and cash equivalents-which are deployed in bank deposits, mutual funds, CDs and Government Bonds and other marketable securities-shrunk to Rs 76,339 crore compared to Rs 89,966 crore. The interest cost rose to Rs 1,209 crore as against Rs 945 crore in corresponding period of the previous year-increase is primarily on account of higher average exchange rate for the quarter.

The consolidated turnover of the third quarter increased by 16.1 per cent to Rs 84,189 crore on account of price rise of products after 13 per cent jump in Brent crude prices. The rise in global oil demand by 1.4 million barrels a day in 2016 led gives hopes to RIL since it exported $4.9 billion worth refined products from India in the quarter.

Reliance Jio, which spent about 1.25 lakh crore to build the digital network, expanded its customer base to 72.4 million at the end of December.

"This subscriber addition rate is the fastest achieved by any company in the world including the likes of Facebook, WhatsApp and Skype," the company claimed. Jio is continuing with free of cost services till March 31. Jio plans to expand its 4G network in India to cover over 90 per cent of population shortly.

While RIL complained in the statement that Jio continues to face interconnection congestion issues. "The POI capacity provided by these operators (rivals) is still way below requirement and is falling short of the customer addition pace of Jio, resulting in quality of service issues for Indian customers. The resultant call failure rates continue to be of the order of 175 calls failing out of every 1,000 calls from Jio to Airtel network."