A good show by the refining and petrochemicals segments saw Reliance Industries sail through comfortably in the recent June quarter with consolidated profit up 28 per cent y-o-y to a record high of ₹9,108 crore.

The bottom-line was boosted by an exceptional item of ₹1,087 crore — profit from divestment of stake in Gulf Africa Petroleum Corporation. But even excluding this, overall profit growth was a robust 12.8 per cent y-o-y to ₹8,021 crore.

Contrary to expectations, the gross refining margin rose to $11.9 a barrel in the June quarter, a nine-year high, and up from $11.5 a barrel in the year-ago period. This, along with higher volumes, saw the refining business, the largest contributor to profit, deliver more than 13 per cent profit growth to ₹7,476 crore (including the exceptional gain) in the quarter.

Efficient crude oil sourcing helped offset weaker product margins in refining. But it was the petrochemicals business with nearly 44 per cent profit growth y-o-y to ₹4,031 crore that bumped up the overall good show. Better price realisations, higher volumes due to capacity additions and margin improvement to 15.8 per cent, an all-time high, aided the strong show in the petchem segment. The strong show in these two key segments more than offset the continuing weakness in the oil and gas exploration segment; lower volumes in both the domestic and international (US shale) operations and lower domestic prices saw the segment’s loss widen to ₹373 crore from ₹312 crore in the year-ago period. In contrast, profit in the organised retail business nearly doubled y-o-y to ₹292 crore, led by store additions and growth across categories.

The telecom business is yet to make a meaningful contribution to the bottom-line. But prospects for this segment, which is continuing to see huge investment, seem good with large-scale customer additions and the company stepping up on its tariff plans. The big investments being made in the refining and petchem businesses should continue to drive growth in the near-to-medium term. RIL, along with its partner BP, has recently announced new plans for significant investment in the oil and gas exploration business. But benefits from this are uncertain and likely to be quite long-drawn.

RIL’s plans to acquire 24.92 per cent stake in Balaji Telefilms for Rs 413 crore will strengthen its offerings in the digital and media businesses. The RIL stock is up more than 40 per cent this calendar, thanks to the company having started charging for its mobile services, and expectations of gains flowing in from the investments in the refining and petchem segments.

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