Reliance Industries Reports Mixed Results – Gains in Digital Sector; Deficit in Oil, Chemical and Gas

Indian multi-sectoral conglomerate Reliance Industries has released their fiscal report for the second quarter of FY 2024-25. Their overall performance was impressive, with $30.8 BN in revenue generation, which was 0.8% more than the previous year.

Their best performing sector, the digital segment which houses JIO, recorded an impressive 17.7% Year on Year (YoY) revenue growth. Their least performing sector was Oil and Gas with a 6% fall in revenue.

Overall Performance of Reliance Industries:

•             Consolidated revenue: INR 258,027 crore (US$30.8 bn), 0.8% YoY.

•             EBITDA: INR 43,934 crore (US$5.2 bn), 2.0% YoY.

•             PAT: INR 19,323 crore (US$2.3 bn), 2.8% YoY.

Oil & Gas Segment:

•             Total Revenue: INR 6,222 crore, -6.0% YoY.

•             EBITDA: INR 5,290 crore, 11.0% YoY.

The company predicts elevated prices and volatility in global gas and LNG sector due to escalating geopolitical tensions. Short term prices too are likely to remain elevated due to a strong prediction of  La Niña.

Global oil demand in the last quarter was up by 0.8 mb/d YoY as opposed to 2.5 mb/d in 2Q FY24. Demand for transportation oil also remained strong. Gasoline demand from the Middle East and North America was up by 0.35 mb/d YoY, whereas Jet/Kero demand was up by 0.3 mb/d YoY. Gasoil demand remained steady YoY.

Indian gas market is also predicted to rise due to a growing demand for power and a robust pipeline infrastructure. Domestic oil demand was up by 2.2% YoY and down by 7.5% QoQ. Steady growth in two-wheeler sales and a strong demand for personal mobility led to a rise in need for gasoline. It shot up by 7.3% YoY.

A considerable rise of 6.5% YoY of domestic air traffic in July and August led to 9.4% YoY demand surge in ATF. Steady agricultural and economical activities led to a marginal rise in HSD demand.

Oil To Chemical (O2C):

•             Total Revenue: INR155,580 crore, 5.1% YoY.

•             EBITDA: INR12,413 crore, -23.7% YoY.

Fuel cracks suffered a steep fall due to supply disruptions. Market remained impacted due to unfavourable demand-supply fundamentals. YoY declines were more significant due to global factors and seasonal influences.

Average brent crude prices fell 7.6% YoY and 5.6% QoQ to $80.2/bbl due to demand-supply gap from non-OPEC suppliers. U.S ethane prices fell down 47% YoY to 16 cpg due to decline gas prices and ready availability of ethane.

There was a sharp decline in regional refining margins due to a weaker demand of products. Additionally, overflowing product inventory is also linked with the decline.

Domestic Polymers and Polyester Demand:

•             Polymer demand declined by 5% YoY due to price volatility.

•             Polyester demand decreased by 7% YoY, primarily due to lower demand from the beverage sector.

•             PVC demand remained stable, while PE and PP demand decreased.

Domestic Polymer Deltas:

•             Polymer deltas decreased due to excess supply and firm feedstock prices.

•             PE and PP deltas declined due to high feedstock prices.

•             PVC delta declined due to higher EDC prices and lower PVC prices.

Domestic Polyester Chain Delta:

•             Polyester chain delta declined due to a sharp drop in PX deltas.

•             Firm naphtha prices and weak downstream demand impacted PX deltas.

•             Recovery in downstream polyester deltas supported chain margins.

Based on their report, a strong revenue from the digital sector has largely offset the minimum O2C earnings. The report projects further strengthening of operations and a momentum in growth due to the upcoming festive season in India.