India’s Reliance misses profit view as oil-to-chemicals business drags

BENGALURU (Reuters): Reliance Industries Ltd (RELI.NS), India’s most valuable company, reported a wider-than-expected drop in first-quarter profit on Friday, as its flagship business was hurt by weak demand and a fall in refining margins.

Reliance’s oil-to-chemicals business is still its main growth engine that powers both profit and revenue, despite the company’s aggressive expansion into retail, telecom and green energy.

“(Oil-to-chemicals) demand was impacted by destocking on recessionary fears and high-interest rates, as well as slower than expected ramp-up in China markets,” Reliance said in a statement.

The profit on refining a barrel of crude oil in Asia plunged about 41% to $3.44 a barrel in the April-June period, according to Refinitiv data.

Analysts had cautioned that the performance of the main business would be impacted in the quarter by declines in gasoil and jet fuel cracks. The company stopped providing updates on gross refining margins a few quarters ago.

The Mukesh Ambani-led conglomerate said consolidated profit fell to 160.11 billion rupees ($1.95 billion) in the quarter ended June 30 from 179.55 billion rupees a year earlier.

Analysts expected the company to report a profit of 168.42 billion rupees.

Revenue from operations fell 5.4% to 2.11 trillion rupees, primarily driven by a 17.7% drop in sales at the oil-to-chemicals segment, which took a hit from weak crude prices and lower price realisation of downstream products.

Reliance said earnings before interest, taxes, depreciation, and amortization, a key profit metric, for the retail division rose 33.9% during the quarter.

Telecom unit Reliance Jio reported its slowest profit and revenue growth in six quarters on Friday, hit by higher expenses and a lack of recent tariff hikes.