RELIANCE INDUSTRIES LIMITED - Q2 FY 21 - RESULTS REVIEW

 

RELIANCE INDUSTRIES LIMITED

Q2 FY 21 RESULTS REVIEW

DATED 01 11 2020

 

CONSOLIDATED RESULTS FOR QUARTER ENDED 30THSEPTEMBER,2020

STRONG SEQUENTIAL REBOUND ACROSS ALL BUSINESSES

CONSOLIDATED QUARTERLY REVENUE WAS HIGHER BY27.2% AT `128,385 CRORE

CONSOLIDATED QUARTERLY EBITDA GREW BY 7.9% TO `23,299 CRORE

CONSOLIDATED QUARTERLY PAT BEFORE EXCEPTIONAL ITEM AT`10,602 CRORE HIGHER BY 28%

CONSUMER BUSINESSES CONTRIBUTED 49.6% OF CONSOLIDATED SEGMENT EBITDA

RECORD QUARTERLY EBITDA FOR DIGITAL SERVICES AT `8,345 CRORE

ROBUST RECOVERY IN RETAIL EBITDA TO`2,006 CRORE HIGHER BY 85.9%

CAPITAL RAISE OF `152,056 CRORE IN JIO PLATFORMS LIMITED

CAPITAL RAISE OF `37,710 CRORE IN RELIANCE RETAIL VENTURES LIMITED

FIRST TELECOM OPERATOR OUTSIDE CHINA TO CROSS 400 MN SUBSCRIBERS IN A SINGLE COUNTRY MARKET

ADDED IN EXCESS OF 30,000 TO ITS WORKFORCE

 

STRATEGIC UPDATES

• Jio Platforms Limited, a wholly owned subsidiary of Reliance Industries Limited, raised ₹ 152,056 crore  from  leading  global  investors  (including  Facebook,  Google,  Silver  Lake,  Vista  Equity Partners,  General  Atlantic,  KKR,  Mubadala,  ADIA,  TPG,  L  Catterton,  PIF,  Intel  Capital  and Qualcomm Ventures).

•Reliance  Retail  Ventures  Limited  (RRVL),  a  wholly  owned  subsidiary  of  Reliance  Industries Limited, raised ` 37,710 crore of investments from leading global investors (including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG and ADIA).

•RRVL has entered into an agreement to acquire retail & wholesale business and the logistics & warehousing business of the Future Group for a consideration of `24,713 crore. (This acquisition is subject to SEBI, CCI, NCLT, shareholders, creditors and other requisite approvals.)

•RRVL  acquires  majority  stake  in  leading  digital  pharma  market  place  “Netmeds”  for  a consideration of ~ `620 crore.

•Qualcomm  Technologies,  Inc.  and  Jio  Platforms  Limited  (Jio)  along  with  its  wholly  owned subsidiary Radisys Corporation announced expanded efforts to develop open and interoperable interface compliant architecture based 5G solutions with a virtualized RAN. This work is intended to fast track the development and roll out of indigenous 5G network infrastructure and services in India.

•The Company supported job creation in the economy during the pandemic-impacted period and generated in excess of 30,000 new jobs during April – September 2020 in Consumer businesses and last mile delivery.

RESULTS AT AGLANCE(Q-O-Q) CONSOLIDATED -RIL

•Revenue for the quarter was `128,385crore($ 17.4 billion) higher by 27.2%

•EBITDA before exceptional item for the quarter was `23,299crore($ 3.2 billion) higher by 7.9%

•Net Profit before exceptional item for the quarter was `10,602 crore ($ 1.4 billion) higher by 28.0%

•Cash Profit before exceptional item was `16,837 crore ($ 2.3 billion) higher by 20.9%

•EPS before exceptional item was `14.8 per share, increased 14.9%

STANDALONE -RIL

•Revenue for the quarter was `64,431crore($ 8.7 billion)higher by 23.3%

•EBITDA before exceptional item for the quarter was `11,811crore($ 1.6 billion)higher by 4.0%

•Net Profit before exceptional itemfor the quarter was `6,546crore($ 887 million)higher by 34.3%

•Cash Profit before exceptional item for the quarter was `7,201 crore ($ 976 million) higher by 31.6%

•Exports for the quarter was `34,501 crore ($ 4.7 billion)growth of 5.6%

CONSOLIDATED –JIO PLATFORMSLIMITED

•Revenue including access revenues for the quarter was `21,708crore($ 2.9 billion) higher by 7.1%

•EBITDA for the quarter was `7,971crore($ 1.1 billion)increase of 8.7 %

•Net profit for the quarter was `3,020crore($ 409 million)growth of 19.8%

•Total Customer base as on 30thSept 2020 of 405.6 million, growth of 1.8%

•ARPU during the quarter of ₹145.0 per subscriber per month as against ₹140.3 per subscriber per month in the trailing quarter

•Total wireless data traffic during the quarter of 1,442 crore GB;1.5% growth

CONSOLIDATED –RELIANCE RETAIL

•Revenue for the quarter was `41,100crore ($ 5.6 billion) higher by 30.0%

•EBITDA for the quarter was `2,006crore ($ 272 million) higher by 85.9%

•Net profit for the quarter was ₹973crore($ 132 million)higher by 125.8%

•Cash Profit for the quarter was ₹1,408crore($ 191 million)higher by 77.3%

•11,931 operational physical stores; net addition of 125 stores during the quarter

Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited  said:

“We  delivered strong overall operational  and  financial performance compared  to  previous quarter with  recovery  in  petrochemicals  and  retail  segment,  and  sustained growth in Digital Services business. Domestic demand has sharply recovered across our O2C business and is now near pre-Covid level for most products.

Retail business activity has normalised with strong growth in key consumption baskets as lockdowns ease across the country.

With large capital raise in last six months across Jio and  Retail  business,  we  have  welcomed  several  strategic  and  financial  investors  into  Reliance family. We continue  to pursue growth  initiatives  in  each  of  our  businesses  with  a  focus  on  the  India opportunity.”

OPERATIONALHIGHLIGHTS

CONSOLIDATED JIO PLATFORMS LIMITED

•Consolidated revenue from operations, including access revenues, grew by7.2%to ₹18,496crore,Q-o-Q

•Consolidated  EBITDA  of  ₹7,971  crore  and  EBITDA  margin  of  43.1%,  up from  42.5%  in 1QFY20-21

•Consolidated Net Profit grew by 19.8% to₹3,020 crore, Q-o-Q

•Total Customer base as on 30thSeptember 2020 of 405.6 million

•ARPU during the quarter of ₹145.0 per subscriber per month

•Total wireless data traffic during the quarter of 1,442 crore GB

•Total voice traffic during the quarter of 93,223 crore minutes Connectivity

•Jio has become the only operator (outside China) to have reached the milestone of 400 million subscribers in a single country market.

•Wireless  gross  addition  showed  a  strong  sequential  increase  to  27.2  million  as  lockdown restrictions began to ease during the quarter.

•Monthly  churn  rate for  wireless  subscribers  increased  to 1.69%  with follow  through  impact  of COVID on SIM consolidation and recharge cycle of migrant population.

•Customer engagement continued to be robust with average wireless data consumption per user per month at 12.0GB and average voice consumption at 776 minutes per user per month, with an increasing usage of application-based voice on data networks.

Digital Platforms

•Jio   Platforms   expanded   efforts   to   develop   open   and   interoperable   interface   compliant architecture based 5G solution with a virtualized RAN. This is intended to fast track the roll out of indigenous 5G network infrastructure and services in India. Qualcomm Technologies and Jio achieved over a 1 Gbps milestone on the Reliance Jio 5GNR solution with a Tier-I carrier in the US.

•JioUPI  pan  India  rollout  on  MyJio was  completed  during  the  quarter.  This  would  help  secure financial transactions and bill payments across all Jio digital platforms.

Update on Investments into JPL

•JPL has completed the fund raising of ₹ 152,056 crores across thirteen global investors which includes  Facebook,  Google,  Silver  Lake,  Vista  Equity  Partners,  General  Atlantic,  KKR, Mubadala,  ADIA,  TPG,  L  Catterton,  Public  Investment  Fund,  Intel  Capital  and  Qualcomm Ventures for a cumulative equity stake of 32.96%.

•All  of  these  investments,  excluding  Google,  have  been  completed  post  fulfilling  applicable conditions and total amount of ₹ 118,319 crore has been received by the Company.

CONSOLIDATED RELIANCE RETAIL:

•Consolidated Value of sales and services for 2Q FY21 increased by 30.0% Q-o-Q to ₹ 41,100crore,  a  strong  performance  given  that  the  full  store  network  was  not  operational  and  with footfalls still significantly lower than pre-COVID levels.

•Revenue from operations for 2Q FY21 increased by 29.7% Q-o-Q to ₹ 36,566 crore, and at the same level as the last year despite restricted store operations and lower footfalls,

•EBITDA for 2Q FY21 increased by 85.9% Q-o-Q to ₹ 2,006crore. EBITDA margin (on revenue from operations) recovered by 170 bps to 5.5% in 2Q FY21 against 3.8% in 1Q FY21.

•Overall, Reliance Retail’s 2Q FY21 performance reflects resilience and customer preferences. The business is focused on restoring the momentum to pre-pandemic levels as operating curbs and limitations are relaxed.

•Decisive   actions   taken   by   the   business   to   adapt   and   strengthen   its   operating models/capabilities for a post COVID world, positions it well to maintain its consistent industry leading performance.

•The  operating  environment was  subdued,  though  lockdown  related  restrictions  on  store operations were progressively eased during the quarter. Partially open and fully open stores were up to 85% in 2QFY21. Footfalls, while recovering, are still lower than pre COVID levels, particularly across Fashion & Lifestyle and mall stores. 

•With  revenues  of `41,100crore  and  EBITDA  of `2,006crore,the  performance  marks  an industry leading performance with a ‘V shaped’ recovery over 1QFY21, as sales grew30%, EBIDTA nearly doubling and margin improving +170 bps Q-o-Q.

•The quarter saw robust growth over the previous quarter across all consumption baskets. The strong  growth  momentum  was  sustained  in  Grocery  and  Connectivity  while  Consumer Electronics and Fashion & Lifestyle staged a significant recovery.

•The robust EBITDA delivery was enabled by a build back of revenue streams and the continued emphasis on cost management.

•With operating curbs being lifted progressively, store expansion resumed with 232 stores being opened during the quarter, taking the current footprint of the business to 11,931 stores, spread over 29.7 million sq. ft. of retail space.

•The  business  continued  making  steady  progress  on  bringing  New  Commerce  to  life.  Digital commerce capabilities were augmented across all consumption baskets and partnerships with merchants in Grocery and Fashion & Lifestyle expanded further. •We also entered the Pharma category during the quarter.

Consumer Electronics

•Consumer  Electronicsdelivered  a  strong  performance  with  revenues  at  2xover  previous quarter, and notably double-digit growth  over the previous year, despite lower footfalls.

•Growth was broad based across categories, with laptops and productivity devices more than doubling and  High  End  TVs,  Air  Care  and  Appliances  delivering  strong  growth.  The performance  was  bolstered  by  sharp  and  focused  event  activation  particularly  during  the Independence Day Golden Event, enabled by unmatched offers, strong value proposition and affordability schemes.

•The  business  moved  swiftly  to  make  entire  network  of  Digital  stores  omni-enabled.  Digital commerce  activation  led  to  a  significant  uptick  in  orders  over  last  quarter.  Notably  88%  of orders  from  stores  were  delivered  in  under  6  hours,  reflecting  an  unmatched  delivery proposition to customers.

Fashion & Lifestyle

•With more stores being allowed to operate, Fashion and Lifestyle categories delivered strong sequential recovery with revenues up 3X over previous quarter. •In Apparel and Footwear, focused activation in-store saw conversions and bill values move up to record highs. Trends stores in small towns performed very well.

•With  the  continued  thrust  on  digital  commerce,  100%  of  Trends  stores  were  omni-enabled. AJIO scaled new highs with 4x growth in orders from pre-COVID levels. Its quarterly revenue run rate is now equivalent to full last year’s revenue.

•The B2B initiative ramped up further as partnerships with merchants now extend across 1,700 cities and orders growing 4X over 1Q FY21

•Jewels had one of its strongest quarter’s with share of diamond sales in the overall mix rising. The business expanded its presence online with listings on AJIO.

•In the luxury and premium brands business, omni channel capabilities were ramped up, with digital  commerce  revenues  up  3X  over  previous  year.  The  business  continued  to  take pioneering initiatives to engage with its customers.

Grocery

•The strong growth momentum in Grocery was sustained as it delivered yet another quarter of performance well ahead of market. The quarter saw the continued trend of lower footfalls being more than offset by higher bill values.

•JioMart continues to scale-uprapidly with consistent increase in daily customer orders.

•From a portfolio perspective, staples and processed food categories continued to drive growth, with Home and Personal Care (HPC)delivering a buoyant performance this quarter.

•The business continued to leverage brand partnerships and strengthen its own brand portfolio with a range of product launches to delight its customers.

•JioMart  Kirana partnerships were extended to 20 cities during the period with 4X increase in orders over  1Q  FY21.  With  a  strong  value  proposition  and  uninterrupted  service  despite operating constraints, JioMart continues to win the trust of Kirana partners.

O2C-PETROCHEMICALS

•Segment Revenue increased by 17.8% Q-o-Q with higher prices across product portfolio and higher  volumes. PP,  PE  and  PVC  prices strengthened by  13%, 17%  and 25%  Q-o-Q respectively due to tight supply with regional turnarounds and improvement in demand. With increase  in  feedstock  prices, PX  prices firmed  10%  Q-o-Q while PTA and  MEG prices increased by 4% and 10% respectively.

•Naphtha prices increased by 56% Q-o-Q following crude prices and healthy demand.

•Cracking  margins  for  Reliance  improved  Q-o-Q  due  to  feedstock  mix  and  favourable economics  for  ethane  cracking. RIL crackers  operated  at  near  100%  utilisations  during  the quarter.

•Segment EBITDA for 2QFY21 increased by 34.6% Q-o-Q to ₹ 5,964 crore primarily on account of  higher production volume and  higher  volume placement  in  domestic  market. EBITDA margins also improved sequentially by 250 bps with firm cracker margins, effective product and sales mix and superior ethane cracking economics.

•PP margins reduced by 21% ($ 126/MT) due to higher feedstock prices despite robust demand from health & hygiene applications. PE margins remained stable ($ 478/MT) with firm demand from  packaging  sector. PVC  margins improved by 14%  ($546/MT)led  by  strong  demand recovery in agri and construction sector.

•PX-Naphtha delta declined 37% Q-o-Q ($ 136/MT)with sharp increase in naphtha price while PTA margins declined by 14% Q-o-Q ($107/MT)in well-supplied markets. PX and PTA markets were also impacted by start-up of new capacities in China.

•Domestic polymer and polyester demand improved amidst easing of lockdown and revival of downstream operations with improved labour availability. RIL achieved highest ever quarterly polymer domestic sales by leveraging domestic supply chain, multimodal logistics and nation-wide  warehousing  facility. RIL  placed  higher  volumes of  polyester  products in  the  domestic market with improved operating rates for spinning and texturizing units

O2C-REFINING &MARKETING

Global oil demand for 2QFY21 was at 93.6 mb/das per IEA, Q-o-Q increase of10.6 mb/d with easing of lockdowns across economies. Indian oil product demand also improved by 11.3% Q-o-Q, led by HSD (5.3%), MS (41.1%)and ATF (107.4%).

•Segment Revenues for 2Q FY21 increased by 33.3% Q-o-Q to ₹ 62,154 crore primarily due to higher crude oil price. Dubai crude price averaged at $42.9/bbl during the quarter v/s $30.5/bbl in 1QFY21, up40.5% Q-o-Q.

•Average  Singapore  Complex  margins for  the  quarter  was  at $0.05/bbl  as against $-0.9/bbl  in 1QFY21with  recovery  in  mobility  fuels  led  by  gasoline. Reliance  maintained  a  significant premium of $5.7/bbl over regional benchmark.

•Crude throughput was optimized with opportunistic sourcing of Crude barrels in view of higher crude prices and narrow Arab Light-Heavy differentials.

•RIL used flexibility in its refining configuration to swing significant production of ATF into Diesel and other products, as ATF demand was severely impacted due to air travel restrictions.

•Segment EBITDA for 2Q FY21 declined by 21.4% Q-o-Q to ₹ 3,002 crore primarily on account of  lower middle  distillates  cracks  and  narrower  light-heavy  crude differential  leading  to higher crude  cost. The  performance  wasalso  partially  affected  by  planned  turnaround  during  the quarter.

•Reliance BP Mobility Limited (“RBML”), a joint venture (JV) of RIL and BP operated 1,406 fuel retail outlets. Against industry growth of 5.3% and 41.1%Q-o-Q in HSD and MS, RBML clocked 15.1% and 55.4% respectively.

OIL AND GAS (EXPLORATION &PRODUCTION)BUSINESS

•Segment Revenues for 2QFY21 declined by 29.8% Q-o-Q to ₹ 355crore primarily due to lower price realisation and decline in production.

•KGD6 -R-Cluster development:

oAll wells have been drilled, completed, tested and connected. The sub-sea installation and testing works have also been completed.

oCurrently work on Control & Riser Platform is underway, with first gas expected in 3Q FY21.

•CBM: Production level remained stable at 0.94 MMSCMD with ongoing focus on sustaining and augmenting production.

•US Shale: Oil and Gas companies in US responded to Covid-19 pandemic with significant Capex cuts, as a result of which both WTI and HH prices improved Q-o-Q by 47% and 15% respectively. Both the Chevron and Ensign JV have suspended development activity.

•For July’2020-Sept’2020 period, the overall price realization was at $ 1.82/Mcfe, up 15%Q-o-Qand production was3% lower at 24.5Bcfe.

 

MEDIA BUSINESS

•Segment Revenues for 2Q FY21 roseby31.5% Q-o-Q as COVID-linked impact on ad-revenues receded over the quarter.

•EBITDA for  2Q  FY21was  at ₹  166 crore. Operating  margins  continued  to  improve,  as Broadcasting margins rose sharply, and Digital News business swung into profitability.

•Ad-revenues rebounded sharply, as economic activity restarted on tapering of lockdowns. News business’ advertising has fully recovered, and Entertainment recovery is near-complete by the end  of  the  quarter.  Subscription  revenues  have  been  resilient;  and  domestic  subscription revenue continues to rise led by expanding TV & Digital distribution tie-ups.

•Concerted  efforts  to  re-base  cost-structures  in  the  new  normal  have  driven  efficiencies  and improved operating leverage.

•TV viewership has now settled at ~1.1x pre-COVID levels. Pay-TV has clawed back its share from free-to-air channels, as entertainment programming is back in full-swing.

•An   increased   propensity   to   pay   for   content   has   been   witnessed.   Flagship   properties MoneyControl and Voot have witnessed rapid growth in subscribers.

 

CONSOLIDATED FINANCIAL HIGHLIGHTS:

•For the quarter ended 30thSep, 2020, RIL achieved revenue of ₹ 128,385crore ($17.4billion), as compared to ₹ 100,929crore in the trailing quarter. The increase in revenue was primarily due to higher price realizations in  O2C  segment, strong  recovery  in Retail operations and sustained subscriber addition with improvement in ARPU in Digital services business.

•Exports (including deemed exports) from RIL’s India operations increased by 5.6% to ₹ 34,501 crore ($ 4.7billion) as against ₹ 32,681crore in the trailing quarter due to higher price realizations despite lower export volume.

•EBITDA increased by 7.9% to ₹ 23,299crore ($ 3.2 billion) from ₹ 21,585crore in the trailing quarter, led by EBITDA margin improvement across businesses.

•Finance cost was at ₹ 6,084crore ($ 825million) as against ₹ 6,735crore in the trailing quarter. The decrease in finance cost was due to pay down of higher cost liabilities. This was partially offset by higher charges on account of prepayment of liabilities. Increase in finance cost was also due  to  merger  of  RHUSA during  the  quarter as the  current  quarter  reflects  cumulative finance costs of 1Q FY21 as well as 2Q FY21.

•Current tax expense was ₹923crore in the trailing quarter as against ₹378crore ($ 51 million)in the current quarter on account of reduction in annual effective tax rate for the financial year. Deferred tax liability largely remained unchanged.

•Profit after tax(pre-exceptional)grew sharply by 28% Q-o-Q at ₹10,602crore ($ 1.4billion)as against ₹8,282crorein the trailing quarter.

•Outstanding   debt   as   on   30thSeptember,   2020   was `279,251 crore   ($37.9billion).Cash and cash equivalents as on 30thSeptember, 2020 were at `185,711crore ($ 25.2billion).Funds received post quarter-end and balance capital commitment receivables are in excess of quarter-end Net Debt levels.

•The capital expenditure for the half-year ended 30th September, 2020 was `28,332crore ($ 3.8billion)including exchange rate difference.

•RIL  retained  its  domestic  credit  ratings  of  “CRISIL  AAA/Stable”  from CRISIL  and  “IND AAA/Stable” from India Ratings and an investment grade rating for its international debt from Moody’s as “Baa2” and “BBB+” from S&P. Fitch has upgraded RIL Local-Currency Issuer Default Rating (IDR) to ‘BBB+’ from ‘BBB’ and retained Foreign-Currency IDR as ‘BBB-‘.