Reliance Q3 profits hit by higher interest and SAED

Net profits of Reliance Industries Ltd for Q3FY23 fell by 15% to Rs 15,792 crore, this is lower than Bloomberg consensus estimates and was triggered by 36.4% higher interest costs, 32.6% higher depreciation and windfall tax on crude oil and diesel. The board of RIL has approved raising Rs20,000 crore via NCDs. Top line revenues from operations were up 15.3% at Rs2.20 trillion, which was supported by 20.4% growth in digital services and 17.2% growth in Reliance Retail. Higher realizations and higher energy prices also helped the oil-to-chemicals (O2C) business of Reliance Industries. 

At an operating level, the EBITDA (earnings before interest, tax, depreciation and amortisation) grew 13.5% to Rs38,460 crore. The big triggers were still digital. The digital / telecom business saw higher EBITDA on higher subscriber base and an 18% rise in monthly ARPU (average revenue per user). Even in the retail consumption and retail baskets, it was the rising contribution of digital sales that triggered higher operating profits. However, with revenues growing faster, the EBITDA margins tapered by 30 bps to 17.4% for Q3FY23. 

The O2C EBITDA saw higher margins in middle distillate cracks, but weak margins across polymer and polyester The special additional excise duty (SAED) pushed down the earnings by Rs1,898 crore. In the oil & gas business, crude prices were higher by 11% yoy while the gas prices realized from KG-D6 went up from $6.1/MMBTU to $11.3/MMBTU on yoy basis. As of December 2022 end, gross debt of Reliance Industries was up 3% at Rs3.03 trillion. With cash and cash equivalents of Rs1.93 trillion, the net debt stands at Rs1.10 trillion; sharply higher than the zero net debt achieved by Reliance Industries in the year 2020.