Retail, Telecommunications and Other New Businesses Begin to Shine for Reliance Industries Ltd – The New Indian Express
Express news service
NEW DELHI: Although its historic business – Oil-to-Chemical (O2C) operations – continues to bring big returns for Reliance Industries, it has made rapid strides in expanding its new age business.
The O2C segment accounted for 63% of the group’s total revenue in the second quarter, and revenue from this business grew 58.1% year-on-year to Rs 120,475 crore during the quarter. However, new Reliance businesses are growing slowly but steadily.
The other Reliance vertical that saw an increase in profits and revenues in the quarter was its fast-growing retail empire. Reliance Retail’s gross revenue during the quarter was recorded at Rs 45,426 crore, growing 10.5% year-on-year and above the pre-Covid period. Net profit for this segment during the quarter amounted to Rs 1,695 crore, up 74.2%. This growth in revenue and net income came even as attendance during the quarter fell to only 78% of pre-Covid levels. The company announced the addition of 813 new stores during the quarter, showing confidence in the prospects for future growth. In addition, its digital and new business platform has grown 2.4 times in one year.
On the other hand, Reliance Jio’s performance was a bit disappointing. Even though the platform’s net profit increased by 23.4% to Rs 3,728 crore (T2FY22) and its ARPU (average revenue per user) improved by 3.7% to Rs 143.6 per subscriber per month, on an annual basis, it lost 11.1 million customers during this quarter on a sequential basis.
This is the first time the company has reported a sharp sequential decline in its customer base. The country’s largest telecommunications operator blamed “the impact of Covid-19” for the loss. At the end of the second quarter, Jio’s subscriber base stood at 429.5 million.
The group led by Mukesh Ambani announced on Friday a consolidated profit of Rs 15,479 crore, an increase of 46% year-on-year (YoY) for the second quarter of FY2021-22 (T2FY22). Its consolidated gross revenue for the quarter jumped 49.2% yoy to Rs 191,532 crore and consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) increased 30% to Rs 30,283 crore.
“Reliance released better-than-expected figures for T2FY22. Sales increased sharply thanks to a 12% year-over-year increase in throughput from refining activities (up sequentially also given the unplanned shutdown of the fluid catalytic cracking unit in the first quarter of the year. fiscal year 22) and higher product prices due to rising rough prices, ”said Deepak Jasani, head of retail research, HDFC Titles.
“Retail has rebounded strongly in both YoY and QoQ. Profitability improved through improved operating leverage, higher product price pass-through and improved performance in the retail and oil and gas businesses. Financial expenses decreased due to lower borrowings after fundraising during FY21. The net debt outstanding is now zero or negative, ”said Jasani.
He added: “The series of acquisitions in the new energy and materials businesses will help create new triggers for growth in earnings and results, but with a lag of a few quarters. However, this will help speed up the process of transforming a commodity player into a diversified new age company and lead to higher valuations. “
Giving a boost to its new age activities, RIL achieved a record number of acquisitions / investments / partnerships at T2FY22. The two companies where the maximum strategic updates took place were the recently formed Reliance New Energy Solar Ltd (RNESL) and Reliance Retail Ventures Limited (RRVL).
RNSL first invested $ 50 million to acquire 42.3 million preferred shares of Ambri Inc, an energy storage company based in Massachusetts, United States. It then signed a cooperation agreement with the Danish company Stiesdal A / S (Stiesdal) for the technological development and manufacture of the HydroGen electrolysers of Stiesdal in India.
It has also entered into an agreement with NexWafe GmbH (NexWafe), a company whose patented technology is expected to reduce the costs of producing wafers, making photovoltaic solar energy the cheapest form of renewable energy available.
The big boost to its solar ambition came when Reliance announced the acquisition of 100% of the shares of REC Solar Holdings AS (REC Group) from China National Bluestar (Group) Co Ltd., for an enterprise value. of $ 771 million. The acquisition of REC will help Reliance with a ready global platform and the opportunity to expand and grow in key green energy markets globally, including the United States, Europe, Australia and elsewhere in Asia.
RNSL also acquires 40% of the capital of Sterling & Wilson Solar. These investments are in line with Ambani’s plans to invest Rs 75,000 crore over the next three years in clean energy. Reliance has set a target of developing solar capacity of at least 100 gigawatts (GW) by 2030, which is more than a fifth of India’s target of installing 450 GW by the end of this decade.
“Given the sufficiently large opportunity of the Indian solar segment, political support through the PLI (Production Linked Incentive) program, the impending tariff hike for Chinese imports and RIL’s proven execution capabilities, this segment promises to quickly become a contributing material to RIL’s business, ”Centrum Broking analysts said in a recent memo.
They expect the company to generate EBITDA of at least Rs 4000 crore by FY24E from this segment.
In retail, Reliance has entered into a master franchise agreement with 7-Eleven, Inc to launch 7-Eleven convenience stores in India. It also acquired a 96.49% stake in subscription-based daily micro-delivery service provider Milkbasket during the quarter.
More recently, it took 52% of the capital of Ritika Pvt Ltd which owns Ritu Kumar, Label Ritu Kumar, RI Ritu Kumar, aarké and Ritu Kumar Home and Living. Along with Ritu Kumar, Reliance also took a 40% stake in the eponymous brand from fashion designer Manish Malhotra. Other notable deals include the takeover of the local search engine platform Just Dial and the acquisition of Creative Group’s interior design businesses under the “Portico” and “Stellar Home” brands in a declining sales.
Analysts also believe RIL’s better-than-expected quarterly result will receive investor approval. “The sharp rise in oil prices has benefited the company in a good way. For JIO and the retail arm, the company performed exceptionally as profits approached pre-pandemic levels thanks to higher footfall in retail stores as well as higher levels of footfall. Higher ARPUs for telecommunications activities, ”said Gaurav Garg, head of research, CapitalVia Global Research. . “In my opinion, the stock could open with a spread of 2% to 2.5% on Monday morning,” Garg added.
Brokerage firm Nomura recently downgraded the RIL’s rating to “neutral” from “buy,” citing rich valuations after the recent ramp-up. However, it raised its target price on the share to Rs 2,850 against Rs 2,400. On Friday, the share closed slightly higher at Rs 2,627.05 each.
Consolidated gross revenue for the second quarter of fiscal 22 jumped 49.2% yoy to Rs 1.91,532 crore
Oil-chemical segment revenue for the quarter increased 58.1% year-on-year to Rs 120,475 crore
Reliance Retail gross revenue grew 10.5% yoy to Rs 45,426 crore
Plan to invest Rs 75,000 cr in clean energy over 3 years
Announcement of the acquisition of 100% of the capital of REC Solar Holdings AS (REC group) from China
National Bluestar (Group) Co Ltd., for an enterprise value of $ 771 million
RNESL acquires 40% of the capital of Sterling & Wilson Solar
Pact with 7-Eleven for the opening of stores
52% of the capital of Ritika Pvt Ltd
40% of the capital of the Manish Malhotra brand
Acquisition of Milkbasket