Reliance's refining business powers quarterly earnings beat as profit rises 40%

Mumbai: Strong refining margins, driven by a global shortage of processing capacity, helped billionaire Mukesh Ambani-led Reliance Industries Ltd post a better-than-expected performance in the July-September quarter, with profit, revenue and operating earnings all beating market estimates.

India’s most valuable company reported a profit of ₹25,548 crore, up 40% from the year-earlier period and nearly a fifth above market expectations. Nine analysts polled by Bloomberg had estimated a profit of ₹21,368 crore.

Consolidated revenue rose more than a quarter from a year earlier to ₹3.3 trillion, driven by stronger refining income. Analysts had estimated revenue of ₹3.1 trillion.

Quick answers to key questions

•5 QUESTIONS

1

How much did Reliance Industries' profit rise in the July–September quarter?⌵

Reliance Industries reported a profit of ₹25,548 crore, up 40% from a year earlier. Its consolidated revenue rose more than a quarter to ₹3.3 trillion.

2

Why did Reliance Industries' profit rise in the September quarter?⌵

Higher refining margins boosted earnings as global disruptions reduced refining capacity and tightened supplies of fuels such as diesel, petrol and aviation fuel. Reliance also benefited from its export-oriented refining business.

3

How did Reliance's oil-to-chemicals business perform in the quarter?⌵

The oil-to-chemicals segment's EBITDA rose 68% year on year to ₹25,203 crore. The company attributed its performance to stronger margin capture and its ability to optimize feedstock sourcing and product placement.

4

How did Reliance's Jamnagar refinery help it during the quarter?⌵

Half of Reliance's refining capacity is in a special economic zone at Jamnagar. That capacity was outside the scope of the windfall tax imposed on domestic refiners.

5

Did all of Reliance Industries' businesses grow in the quarter?⌵

No. Digital Services EBITDA rose about 18%, while Retail EBITDA fell a tenth amid high inflation. Oil and gas EBITDA declined marginally.

Fuel cracks—the difference between the price of crude oil and refined petroleum products—hit historic highs during the quarter as the wars in West Asia and Ukraine disrupted nearly a tenth of the world’s refining capacity, triggering shortages of products such as diesel, petrol and aviation fuel.

The Ambani-led company benefited from its export-oriented business and the location of half its refining capacity in a special economic zone (SEZ) at Jamnagar. This kept that capacity outside the ambit of the windfall tax imposed by New Delhi on domestic refiners.

The benefits could extend into the current quarter, with Reliance gaining access to cheaper Venezuelan crude, which its advanced refinery on Gujarat’s coast is particularly well-equipped to process.

"The print is way better than the market expected," said Harshraj Aggarwal, executive vice president-institutional equity research at Yes Securities. The company's gross refining margins as per his calculations could have expanded closer to $20 per barrel during the quarter, about 30% more than the preceding quarter.

Reliance does not disclose its GRMs, which represent the difference between the value of refined products and the cost of crude oil for every barrel processed, before accounting for operating and fixed costs.

"The margins could expand further in Q3 as the company gets access to Venezuelan crude," Aggarwal said.

Earnings before interest, tax, depreciation and amortization (Ebitda) increased nearly a quarter to ₹56,616 crore, against the Bloomberg consensus estimate of ₹51,942 crore. Ebitda margin, however, contracted 71 basis points to 17%.

“Commodity markets remained volatile while geopolitical tensions continued to weigh on global supply chains,” Ambani said in a press release. “Against this backdrop, the domestic orientation of our portfolio, combined with operational discipline and versatility of our integrated businesses, helped Reliance navigate external volatility effectively.”

Reliance’s oil-to-chemicals (O2C) business, which houses its petroleum refining operations, delivered a particularly strong performance, Ambani said. “Our ability to optimize feedstock sourcing and product placement along with operations across the value chain enabled us to improve margin capture.”

The segment's Ebitda rose 68% from a year earlier to ₹25,203 crore, according to the company's disclosures. The figure includes income from other sources, which analysts typically exclude when calculating Ebitda.

While O2C delivered a strong showing, the Digital Services segment, which houses recently listed subsidiary Jio Platforms Ltd, reported steadier growth. Its Ebitda increased about 18% to ₹22,223 crore.

The retail segment lagged, weighed down by high inflation. Its Ebitda fell a tenth to ₹6,120 crore. The oil and gas segment, which handles exploration and production, reported a marginal decline in Ebitda to ₹4,901 crore.

The company's telecommunications business added net 9.1 million subscribers during the quarter, taking its customer base to 542.4 million, the largest in the country. Its average revenue per user (ARPU), a key metric for telecommunication service providers, expanded by 4% year-on-year to ₹218.8. It lags squarely behind the ₹264 ARPU reported by its closest rival Bharti Airtel Ltd during the April-June quarter. The company is yet to publish its earnings for the September quarter.

Meanwhile, the retail business pruned its network by shutting unprofitable stores. Its store count stood at 19,947 at the end of the quarter, 222 fewer than the preceding quarter despite the opening of 303 new stores.

Shares of Reliance Industries closed 0.44% lower on the BSE on Friday at ₹1,163.55, giving the company a market capitalization of ₹15.7 trillion. The results were announced after market hours. The benchmark Sensex ended 0.42% higher.

Nehal chronicles India’s top conglomerates for Mint. From navigating the complexities of big-bang mergers and large-scale fundraises to decoding high-profile recruitments and seemingly inexplicable corporate pivots, Nehal focuses on unpacking the long-term strategies of the country’s most influential business houses. He aims to provide readers with a clear-eyed view of how these corporate titans shape the broader Indian economy.<br><br>His professional journey began at The Economic Times in 2018, where he spent over five years before joining Mint in 2023. Over his career, he has tracked diverse sectors like automobiles, metals, cement, power, infrastructure, and renewable energy. He also keeps a close watch on the intricacies of corporate finance and corporate governance. This wide-ranging sectoral experience allows him to better understand India’s large conglomerates that sit at the confluence of these vital industries.<br><br>Nehal studied mechanical engineering from the Pune University and graduated with distinction in 2017. Driven by a passion for storytelling, he pivoted to journalism immediately after, attending the Asian College of Journalism in Chennai. While his time in the newsroom has made him a healthy sceptic, his engineering roots keep him perpetually inquisitive about how things work—and why they fail.<br><br>He actively encourages readers to reach out for feedback, collaboration, or news tips. Nehal can be reached via LinkedIn or directly at nehal.chaliawala@livemint.com.

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