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Reliance Industries Ltd., led by billionaire Mukesh Ambani, posted a lower-than-expected quarterly profit as a continued weakness in its petrochemicals business and higher taxes offset growth in its consumer unit and a large surge in other income.

Net income at India’s largest company by market value fell 1.8% to 189.5 billion rupees ($2.3 billion) for the quarter ended March 31 from a year-ago period, according to an exchange filing Monday. That missed the average 197.3 billion rupees profit estimated by a Bloomberg survey of analysts, making it the fourth straight quarter when Reliance’s profit underwhelmed street estimates. 

“Downstream chemical industry experienced increasingly challenging market conditions through the year,” Ambani said in a statement. Reliance is seeing a “multi-decade low” in the petrochemicals business, Chief Financial Officer V. Srikanth told reporters in a post-earnings call.

The energy-to-entertainment conglomerate reported a 9.5% climb in revenue to 2.41 trillion rupees, topping analyst estimates. Total costs rose 12% to 2.18 trillion rupees while tax expenses surged almost 139%. Other income jumped 57% compared to the year-ago quarter.

Key Insights

  • Reliance Industries is in the middle of a new capital expenditure cycle as it expands its existing businesses, such as 5G in telecom and media through acquisitions alongside pivoting to newer sectors, such as green energy and consumer goods.
    • “We remain committed to our projects and initiatives, including those in the New Energy segment, which will bolster the company” in the future, Ambani said
  • OPEC+ members extending voluntary production cuts and geopolitical tensions in Middle East and Russia, Ukraine will likely keep oil price higher, Srikanth told reporters.
    • New refineries in China, Middle East and West Africa also pose a challenge by adding to the supply of fuels, he added.
  • The company saw a flat domestic demand for polymer and polyester in the local market, according to the statement.
  • Reliance Industries’ energy business was undervalued in the past decade amid expectations of a decline in global fuel demand, analyst Mayank Maheshwari at Morgan Stanley said in a note. However, with electric vehicle sales slowing in some countries and increasing global needs for fuel in 2024, the business is expected to increase in valuation, it said.
    • Projections of global petrochemicals overcapacity during the next five years puts the sector “at peak bearishness on earnings outlook,” Morgan Stanley analysts said.
    • Reliance’s investment of 750 billion rupees in expanding petrochemical capacity will support growth beyond FY26, Axis Capital analysts wrote in an April 15 note.
  • In February, Walt Disney Co. and Reliance Industries signed a binding pact to merge their media operations in India to create a $8.5 billion entertainment giant in the world’s most-populous country.
    • In another deal last month, Paramount Global agreed to sell its 13% stake in Viacom 18 Media Pvt. to its partner, Reliance, for $517 million as Ambani cements his stronghold on the Indian media sector.
  • Ambani, Asia’s richest man who recently re-entered the $100-billion-wealth club, is setting up a carbon fiber facility in Hazira as well as a green energy complex on 5,000 acres in Jamnagar. The “New Energy Giga Complex” is expected to be commissioned in the second half of this year.

Market Reaction

  • Reliance’s shares surged almost 15% in the March quarter far outpacing the 2% rise in benchmark S&P BSE Sensex.
  • Earnings were announced after the close of market hours.

Get More

  • Reliance Jio Infocomm Ltd.’s net income jumped 13% y/y to 53.4 billion rupees
    • Jio average revenue per user at 181.70 rupees, no change q/q;
    • Subscriber base at 481.8 million subscribers, up 2.3% q/q
  • Reliance Retail’s quarterly profit was 26.98 billion rupees, up 11.7% y/y
    • 18,836 stores at the end of Mar. 31, up by 796 y/y
  • Oil-to-chemicals revenue was at 1.43 trillion rupees, up 11% y/y
  • Media business Ebitda loss 290 million rupees vs. profit 800 million rupees y/y
  • Total debt stood at Rs 3.25 trillion as of March 2024, up 3.4% y/y
  • Cash and cash equivalents 2.08 trillion rupees, up 10.7% y/y
  • 4Q Capital expenditure fell almost 48% to 232.1 billion rupees
  • Dividend per share 10 rupees

--With assistance from Anirban Nag, Advait Palepu and Satviki Sanjay.

(Updates with CFO’s comments in the third paragraph.)

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