Oil-to-telecom conglomerate Reliance Industries on Thursday posted its biggest drop in quarterly net profit, even as it announced India's largest rights issue and said the Saudi Aramco deal was on track and more strategic investors have evinced interest in buying a stake in its digital platform.
Net profit in January-March slipped 37 per cent to Rs 6,546 crore, the lowest in three years, as a rise in consumer-facing business was not enough to shield the firm from fall in the petrochemical business. The profit was also down due to one-off spending.
The company's board approved a rights issue of Rs 53,125 crore, which it said was the biggest in India and the first by RIL in three decades. "The price of rights issue has been determined at Rs 1,257 per share and the share ratio at 1:15," the company said in a statement.
On the back of last week's USD 5.7 billion (Rs 43,574 crore) Facebook investment in the company's recently created digital arm Jio Platform, Reliance Industries Ltd (RIL) said it is expected to complete capital raising of over Rs 1.04 lakh crore before June.
Besides Facebook's 9.99 per cent investment in Jio Platforms and the upcoming rights issue, this fund includes Rs 7,000 crore that it got for selling 49 per cent stake in the fuel retailing business to BP plc of the UK.
The company said it is in talks with other strategic and financial investors for a Facebook-sized deal in Jio Platform -- the unit that houses India's youngest but biggest mobile operator.
Without revealing the identity of the companies, RIL in its fourth-quarter earnings statement said the investment would be announced in the coming months.
The firm further said its board has approved hiving off its USD 75 billion worth oil-to-chemicals business into a separate division to enable the sale of a 20 per cent stake in the unit to Saudi Arabia's national oil company Saudi Aramco.
The hiving off will be subject to the approval of the National Company Law Tribunal.
"Saudi Aramco due diligence process is on track," it said, without giving timelines for completion of the deal.
The firm's billionaire owner Mukesh Ambani had in August last year announced the deal as part of plans to cut debt at the firm to zero by March 2021. The deal was to conclude by March 2020.
In the fourth quarter, the company said it had an exceptional item of Rs 4,267 crore which dented the profit.
Revenue fell 2.5 per cent to Rs 151,209 crore.
Net profit excluding exceptional items increased by 3.7 per cent to Rs 10,813 crore, it said.
This is the second quarter in 2019-20 that saw a dip in profit. It had reported a quarter-on-quarter decline in Q1 FY20.
Commenting on the results, Ambani, chairman and managing director of RIL, said: "Today I am pleased to announce that despite the daunting challenges arising from the fallout of the global pandemic, our company has once again delivered a resilient performance for FY 2019-20."
"Our O2C (Oil to Chemicals) businesses delivered sustained earnings due to its integrated portfolio, cost-competitiveness, feedstock flexibility, and product placement capabilities. We continue to operate all our major facilities at near-normal utilisation levels," he said.
The consumer-facing business of retail and telecom further strengthened their leadership positions and recorded robust growth on all operating and financial parameters during the year, he said.
"We are fully committed on our investment plans in our consumer businesses and new initiatives. We are at the doorsteps of a huge opportunity and our rights issue and all other equity transactions will strengthen Reliance and position us to create substantial value for all our stakeholders," he said.
While oil refining margins rose for the second consecutive quarter, the company opened 468 retail stores and added 26 per cent more subscribers to its Jio mobile phone service that helped increase the profitability of the venture. But the weakness in its traditional petrochemical businesses continued.
The operator of the world's largest oil refining complex saw pre-tax earnings from the business rise 28.2 per cent to Rs 5,706 crore in the fourth quarter of the current fiscal year.
It earned USD 8.9 on turning every barrel of crude oil into fuel, as compared to a gross refining margin (GRM) of USD 8.2 per barrel in January-March 2019. The GRM was, however, lower than USD 9.2 per barrel earned in Q3.
With its retail store strength rising to 11,784 from 11,316 at the end of the third quarter, the retail business posted a 20 per cent jump in pre-tax profit to Rs 2,062 crore.
Reliance Jio, the group's telecom arm, posted a standalone net profit of Rs 2,331 crore, which was 177.5 per cent more than the previous year, as subscriber base swelled to 387.5 million.
Earning per subscriber rose to 130.6 per month from Rs 128.4 in the previous quarter.
The petrochemical business saw pre-tax profit drop 24 per cent to Rs 4,553 crore on fall in product prices.
Loss in the oil and gas exploration and production business widened to Rs 485 crore from Rs 267 crore in Q4 FY19.
Having completed its major investment cycle, Reliance said its outstanding debt rose to Rs 336,294 crore as on March 31, 2020, from Rs 306,851 crore as on December 31, 2019.
Cash in hand increased to Rs 175,259 crore from Rs 153,719 crore at the end of the December quarter.
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