Revenue growth marks start of new upcycle at Reliance
Reliance Industries (RIL) revenue streams — from energy to retailing and telecom — demonstrated robust growth in the second quarter. Operating profit at India's biggest company advanced 30% year-on-year to ₹44,867 crore.
At the aggregate level, margins climbed nearly 4 percentage points due to more than 30% revenue growth in oil-to-chemicals (O2C), exploration and retail segments that together account for 81% of the revenue and two-thirds of operating profit at the conglomerate.
This helped RIL beat the consensus operating profit forecast. RIL achieved 53% of the expected operating profit for the full fiscal in the first half — an important parameter for analysts to revise their earnings upwards.
The energy vertical that includes O2C and exploration has supported earnings growth, thanks to a sharp improvement in the Singapore gross refining margin, the regional benchmark to gauge refinery profitability, and superior realisation in the gas business.
The Singapore GRM rose $5.5 per barrel to $9.6 on a sequential basis in the September quarter, driven by better realisation of petroleum products.
Consequently, the operating profit of the O2C segment rose by 36% YoY to ₹16,281 crore, while exploration revenue rose 72% on higher gas production and prices.
The current level of refining margin may sustain owing to recent under-capacity, leading to a structurally tight refining system. So, the upcycle in the refining segment may continue albeit with some quarterly volatility.
On the petrochemical side, prices appear to be bottoming out and investors are starting to pay for the chemical repair cycle. With global investors' focus back on the energy sector and RIL having exposure to the refining and chemical segments, it might
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