Reliance Industries Q2FY21 Results Analysis

4 min read
Recently, oil to chemical conglomerate Reliance Industries posted Q2FY21 results. Analysis of latest quarterly results and reasons behind the recent fall in stock price of Reliance Industries.

Why Reliance Industries Stock Price is falling?

Introduction

Yesterday Reliance Industries stock price plummeted 9% to INR 1877 and down 26% from its 52 week high of INR 2368.  Also recently, company reported its Q2FY21 results. Company’s revenue and profitability declined 24% and 6.6% on YoY basis. Let us analyze company’s quarterly results and also take a look at the reasons behind the recent fall in stock price.

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Reliance Industries Q2FY21 Results Analysis

Reliance Industries Consolidated Results

Reliance Industries Q2FY21 consolidated results
Q2FY21 consolidated results – Reliance Industries
  • Company’s revenue posted decline in growth by ~22%, however it has improved sequentially on QoQ basis.
  • EBITDA has declined on YoY basis, however decline in EBITDA is lesser than that of revenues. This indicates that company has decent operating efficiencies.
  • Company has paid its high cost liabilities in this quarter and hence there is a decline in finance costs on QoQ basis.
  • As company liquidated its DTA, it  did not bear any net tax as such.
  • However, net profit has declined 6.6% on YoY basis and 24% on QoQ basis. This is mainly because company has earned exceptional gain of INR 4,966 crore in previous quarter. Excluding this gain, company has registered 28% YoY growth in Net Profit.

Consolidated Revenue Analysis

  • Consolidated revenue jumped 27.2% on QoQ basis mainly due to :
    1. Higher Price Realization in Oil to Chemical segment
    2. Revenue of Petrochemical segment increased by 17.8% QoQ with higher price across product portfolio and higher volumes
    3. Retail : Strong Recovery in Retail operations – Revenue jumped 30% QoQ
    4. Jio : Sustained Subscribers Addition with improvement in ARPU QoQ (Rs.145 from Rs.140 in last quarter) Digital Services Business : Revenue up 7.2% QoQ
    5. Overall telecom and retail business have huge opportunities and will generate more revenues in future.

Consolidated EBITDA Analysis

  • Consolidated EBITDA increased by 7.9% QoQ mainly due to :
    • Strong revival in Oil to Chemical earnings with rebound in Petrochem and Oil product demand
    • Petrochem segment EBITDA increased by 34.6% QoQ primarily on account of higher production volume and high volume placement in domestic market
    • Strong Performance by Consumer Business : contributes 49.6% of total consolidated EBITDA for Q2 FY21 quarter
      • Consumer EBITDA up 16.5% QoQ
    • Retail : Strong recovery in Reliance Retail with increased footfalls and new store openings EBITDA at Rs.2,009 Cr up 85.5% QoQ
    • Jio : Record quarterly EBITDA for Jio (Rs.8,345 Cr) up 7% QoQ
      • Consistently Improving EBITDA Margins (43.1% in Q2 FY21)
      • Continued Subscribers Momentum
  • Consolidated EBITDA Mix
Reliance Industries Q2FY21 EBITDA Mix (%)
Q2FY21 EBITDA Mix (%) – Reliance Industries

Petrochemical Business EBITDA contribution has declined on QoQ basis, while that of digital services has increased significantly.

Equity Raised – strengthened capital structure and earnings

Reliance Industries Capital Raised till date
Reliance Industries Capital Raised till date
  • Largest ever Capital Raise in India through Rights Issue & Asset Monetization :
    • Funds Inflows of Rs.1,46,723 Cr reflecting in balance sheet as on Sept-20
  • Inflows are entirely used to retire debt & other liabilities which helped to reduce the Finance Cost by 10% QoQ, (partially offset by higher charges in pre-repayment of debt)
  • However, entire benefit of lower interest cost is yet to be reflected in subsequent quarters.

Balance Sheet

Reliance Industries Q2FY21 Balance Sheet
Q2FY21 Balance Sheet – Reliance Industries
  • Company is continuously decreasing its gross debt since Mar’20 and is able to increase its cash balances as well.
  • This indicates that there is surplus liquidity with the company.
  • As of Sept’20 , company is net debt free from INR 1.61 lakh crore debt in Mar’20.
  • As company has is net debt free, its Enterprise value has increased from $114 bn to $ 200 bn, with market cap growing by ~2 times from March’20 levels.
  • Reliance Industries become first Indian company to cross $200 billion market cap milestone

Why Reliance Industries stock price is falling down?

 Reliance Industries Stock Price Movement
Stock Price Movement – Reliance Industries
  • As seen, Reliance Industries stock price has fallen by ~9% in one trading session on 2nd November’20.
  • The recent fall in stock price was mainly because of short term events like –
    • Muted performance reported on YoY in recent quarter
    • Legal tussle with Amazon over Reliance – Future group deal
    • Rumours about deteriorating health of Mr. Mukesh Ambani
  • However despite the short term headwinds, company has strong business outlook for its retail and telecom business and the recent fall ideally should not be a concern from long term perspective.

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