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RIL Q2 earnings: Jio surprises with operating profit

13 October 2017

Operating profit before other income and depreciation increased by 39.4 percent to Rs. 15,565 crore, from Rs. 11,164 crore in the corresponding period of the previous year, driven by the refining, petrochemicals and retail businesses, and positive contribution from digital services starting from this quarter.

Low prices have helped Jio net 138.6 million users, consolidating its position as the fourth largest telco. Abhijeet Bora at Sharekhan said that Jio surprised positively with Ebit of Rs 261 crore as compared to an expectation of a loss. Revenue was also boosted by addition of Rs 6,147 crore of earnings from Jio, whose financial performance was included in RIL's earnings for the first time. "We are focussed on providing multi-layered digital services on top of the basic connectivity service to optimally utilise our infrastructure", Reliance chairman Mukesh Ambani, said in a Reliance Jio statement. In Q2, Jio paid Rs 2,000 crore in IUC, Thakur said, adding benefit of lower ICU, which came into force from October 10, depends on the rise in voice calls.

Its telecom arm, Reliance Jio saw its net losses widening to Rs 270.59 crore in the July-September quarter this fiscal against a net loss of Rs 21.3 crore in the preceding quarter. Incumbent operators Airtel, Idea, and Vodafone have blamed the free offers by the newcomer for the failing health of the industry, that, as per some estimates, has a cumulative debt of Rs 4.5 lakh crore. Brokerages had pegged the company's average revenue per user (ARPU) at Rs 110-130, given the Rs 399 plan (for three months, including tax).

The other big surprise came from RIL's petrochemical segment, wherein revenue grew 24.9 per cent year-on-year to Rs 27,999 crore.

"The strong financial results of Jio demonstrates the robust business model of Jio and the significant efficiencies that the Company has built through its investment in the latest 4G technology and right business strategy", he said. Selling and distribution expenses were Rs 2,608.4 million. Margin expanded by 190 basis points sequentially and 247 bps year-on-year to 17.7 percent in quarter gone by. This was on the back of strong delta on the polymer and polyester chain that we have seen this expansion.

Of total capex, Jio eat up around Rs 7,000 crore and going forward in the second, it will remain at that level, Srikant said.

However, pre-tax profit more than doubled to Rs 334 crore.

Profit on a standalone basis, which includes refining, petrochemicals and oil and gas exploration businesses, rose to ₹82.65 billion ($1.27 billion) in the quarter ended September 30, its highest ever.

Gross refining margin (GRM), the profit earned on each barrel of crude processed, was US$12 for the quarter, a nine-year high, but shrunk to US$3.7 per barrel against the benchmark Singapore complex margins due to a falling price difference between light and heavy crude oil grades, Srikanth said. Also GRM for the quarter stood at $12/barrel versus estimated $12.5/barrel.

RIL Q2 earnings: Jio surprises with operating profit