Thu. Mar 28th, 2024

KOLKATA: On April 30, Ambani-owned, Reliance Industries Limited, reported a consolidated profit of ₹6,348 Crore for the 4th quarter of FY2019-20 that ended in March. It further reported the terms of issuance of new equity shares on a rights basis, amounting to a total of ₹53,125 Crore. “Rights issue will enable participation of all shareholders in growth businesses of Reliance, while promoters will subscribe their full entitlement of the rights issue and also to all the unsubscribed portion,” the company said. RIL also recommended a dividend of ₹6.50 per equity share for FY20. Just last week, Facebook secured a 9.9% stake in Jio for an investment of $5.7 billion (₹43,574 Crore) in Jio Platforms. Another Facebook-like deal is in the works for its digital arm, Jio Platforms, it added.

RIL’s consolidated profit dropped 45.5%, this quarter, due to the slump in oil prices, triggered by the global pandemic caused by COVID-19. But, Jio Platforms’ impressive 72.7% sequential growth limited that decline. Its consolidated profit in the third quarter had risen up to 14.11% at ₹11,640 Crore compared to ₹10,362 Crore in the year-ago period.

RIL’s Year on Year decline in profit, last quarter, finally stood at 38.7% with an exceptional loss of ₹4,267 Crore due to fall in oil prices and slumping economy. The oil-to-telecom conglomerate had posted a profit of ₹39,837 Crore in complete FY19. RIL further recorded a rise in revenue of 5.4% at ₹659,205 Crore in FY20, the company said in a regulatory filing.

“In respect to refining and petrochemicals business, the company has determined the non-cash inventory holding losses in the energy businesses due to dramatic drop in oil prices accompanied with unprecedented demand destruction due to COVID-19 and the same has been disclosed as exceptional items,” RIL stated.

However, regarding the Coronavirus crisis, RIL notified, “COVID-19 is significantly impacting business operation of the companies, by way of interruption in production, supply chain disruption, unavailability of personnel, closure / lock down of production facilities etc. Further, during March 2020/April 2020, there has been significant volatility in oil prices, resulting in reduction in oil prices.”

RIL’s refining and petrochemical businesses declined 18.2% sequentially (down 3.4% YoY) to ₹84,854 Crore and fell 12.7% QoQ (down 24.1% YoY) to ₹32,206 Crore, in the last quarter respectively.

“Indeed, converting the corona crisis into a new opportunity, Reliance will innovatively step up its plans to create much greater societal and shareholder value. I am confident that our India and Reliance will emerge stronger in the post COVID-19 world,” chairman and managing director Mukesh Ambani said.

The net profit of its refining business was hit by 45.5% by sharp fall in crude prices. But its earnings before interest and tax (EBIT) grew by 28.2% YoY (down 3.8% QoQ) with higher throughput and better gross refining margins (GRMs). GRM for Q4FY20 at $8.9 per barrel was much higher than street estimates of around $7.2-8.0 a barrel, and was also remarkably outperforming Singapore complex margins by $7.7 a barrel.

“Petrochemicals segment EBIT was at ₹4,553 Crore ($0.6 Billion), down 42.8% YoY, with significant decline in margins. The impact of lower product margins was mitigated to some extent by optimizing feedstock mix during the quarter,” RIL added.

RIL’s revenue from the oil & gas segment fell by 41.5% YoY to ₹625 Crore in the last quarter of FY2019-20. Its segment revenue from oil & gas exploration business had previously dropped 26% to ₹873 Crore during the December 2019 quarter as compared to the corresponding quarter a year ago.

“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,” Mukesh Ambani, Chairman and Managing Director, Reliance Industries said.

RIL also announced India’s biggest rights issue of ₹53,125 Crore — at a ratio of one equity share for every 15 held by shareholders — at a price of ₹1,257 per share against April 30’s closing of ₹1,467.05 per share. The rights issue, set to be the largest in India, will be the first by RIL in 29 years.

The largest listed company in India is expected to complete the over ₹1.04 Lakh Crore capital-raising plan by Q1FY21. It includes the investment by Facebook, the upcoming rights issue and an investment by British Petroleum in FY20. It also said Saudi Aramco’s $15-billion investment in its oil-to-chemicals business was on track.

In addition to the Facebook investment, “RIL has received strong interest from other strategic and financial investors and is in good shape to announce a similar sized investment in the coming months,” the company said.

In his AGM speech in August 2019, Ambani had said, “We have a very clear roadmap to becoming a zero net-debt company within the next 18 months that is by March 31st, 2021.” Now, with these equity infusions, RIL is set to achieve net zero-debt status ahead of its own aggressive timeline.

The RIL board also approved a move to spin off the oil-to-chemical (O2C) as a separate business subject to approval of National Company Law Tribunal. Reliance will transfer the O2C business to an entity named Reliance O2C Limited, according to the so-called scheme of arrangement.

This will be done on a slump sale — the transfer of a division of a company to another entity as a going concern — basis for a lump-sum amount equal to the income tax net worth of the O2C division on the appointed date of the scheme. The O2C business comprises the entire oil-to-chemicals business including refining, petrochemicals, fuel retail and aviation fuel (majority interest only) and bulk wholesale marketing businesses together with its assets and liabilities.

Earlier in the day, the company announced that its entire board and senior leaders would take a pay cut ranging between 30 to 50% as a proactive measure to counter the cost pressures from the unprecedented challenges posed by the coronavirus outbreak.

“In light of the COVID-19 outbreak in India, which has exacted a huge toll on the societal, economic and industrial health of the nation, Mukesh Ambani, the Chairman and Managing Director, has voluntarily decided to forego his entire salary,” the company further added.

RIL has announced up to 10% salary cuts for some of its employees, working in the hydrocarbon division, in the wake of coronavirus pandemic. The company has deferred cash bonus and annual perform performance-linked incentives. According to RIL, it will keep analysing “economic and business environment” and will reconsider its response based on the future situation.

RIL share price fell 26.4% in the March-end quarter of FY2019-20 and 5.8% year-to-date, but has registered a 63% rally from low of March 23 amid expectations of rising ARPU, growth in Reliance Jio and consistent progress in deleveraging balance-sheet plan.

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