Reliance Industries declared its Q4FY21 results last Friday. Being such a dominant company of the nation, it is important to study how they fared in FY21 which brought huge unprecedented challenges for everyone in the society.
Reliance reported consolidated revenue of Rs 1,72,095 crore in Q4 FY21 against Rs 1,37,829 crore reported in the previous quarter. Thus achieving a significant 25% increase in one quarter itself. At the same time, EBITDA (Earnings before interest, taxes, depreciation and amortization) has increased by 1.9% to reach Rs 26,602 crore. Consumer business had a share of almost 49% in the overall EBITDA. The consolidated net profits recorded a 0.7% increase to reach Rs 14,995 crore against Rs 14,894 in Q3 FY21. (EBITDA is a financial metric that helps the shareholders know about the company’s operating performance. It is calculated by subtracting a company’s expenses other than interest, taxes, depreciation and amortization from its net income).
When compared to FY20, Reliance amassed a profit after tax of Rs 53,739 crore, that is, a growth of 34.8% in FY21. After a successful year, Reliance decided to share some of its profits with its shareholders. They announced a dividend of Rs 7 per share. Earnings Per Share for this year was Rs 76.4 per share, which is 21.1% more than what it was last year. Cash profit also witnessed an increase of 18.8% when compared to the last year to reach Rs 79,828 crore.
Let’s dig deeper and understand where these numbers come from and how Reliance’s various segments performed this year.
Reliance Jio
In Q4 FY21, the company recorded an EBITDA of Rs 8,573 crore which was a 1.1% increase when compared to the previous quarter. Net Profit for this domain is Rs 3,508 crore, only a 0.5% growth as compared to the previous quarter. Their EBITDA margin has improved by 6% from 40.9% to 46.9% on a YoY basis.
A major setback came in terms of ARPU (Average revenue per unit). Higher the ARPU, higher the amount of money a customer is receiving per customer. But, Jio recorded an ARPU of Rs 138.2 when compared to Rs 151 of the previous quarter. Total data traffic during the quarter was 1,668 crore GB, which is 17.9% more than what was reported in the same quarter last year. When talked in yearly terms the total data traffic is amassed to be 6,250 crore GB, again a substantial increase of 28.9%.
They have a customer base of 426 million (as of 31st March 2021) and are committed to enhancing the digital experience of the people. Average data consumption per user per month in the fourth quarter stood at 13.3 GB.
Their gross addition of new customers stands at 31.2 million whereas the net addition is 15.4 million for this quarter. This means in FY21, they have added 99.3 million customers (gross level).
Reliance Retail
As restrictions were eased to the almost full extent during January to March, the retail arm of Reliance enjoyed a 24.4% increase in revenue to Rs 47,064 crore. EBITDA was recorded to be Rs 3,617 crore, 17.2% higher than the previous quarter. Net profit for this segment grew by another 22.8% on a quarterly basis to Rs 2,247 crore.
Currently, Reliance Retail has more than 12,500 operational stores. 800+ new stores were opened in the last quarter which tells about the massive expansion plans of the company. The total area of operation was calculated to be 33.8 million sq. feet. In FY20, it was just 28.7 million sq. feet.
Grocery and Fashion & lifestyle were the stars for the entity as they recorded all-time high revenues. The apparel & Footwear business delivered a strong quarter of double-digit growth mostly because of an increase in the prices of the products. The JioMart Kirana partnerships have been extended to 10 new cities. Thus, taking the total count to 33 cities across the nation.
Oil to Chemical (O2C)
Total revenue generated from FY21 comes out to be Rs 3,20,008 crore which is lower than Rs 4,51,355 recorded in FY20. Thus, a decrease of nearly 30%! This occurred mostly due to very low demand from various domains because of the lockdown imposed last year. Also, Brent crude price for the year average to $44.3/bbl against $61.1/bbl which was reported in F20. As both sales and price fell sharply, a decline in total revenue was very much expected.
As lockdown started easing, their revenue started increasing. In Q3 FY21, Reliance generated total revenue of Rs 83,838 crore but in the fourth quarter of this year, their revenue has shot up more than 20% to Rs 1,01,080 crore. The EBITDA of the segment also rose by 17% in just one quarter.
This tells because of the weak demand environment in the first half of the year and lower product price realization had a huge impact. Polymers (PP, PE and PVC) prices fell in the H1 FY21 but in the last quarter, prices of three of them increased by 19%, 16% and 18% respectively which helped them to better the numbers than they were earlier in the year.
Conclusion
Even though the consolidated number suggests that there has been a massive increase in both revenues and net profits, a few things should be particularly focussed. In FY20, RIL reported a Rs 4,444 crore of exceptional losses. This year, in FY21, they have reported an exceptional gain of Rs 5,642 crore. Exceptional losses or gains are for just one time. So, when we look at the profits, we have to sink in the fact that these gains or losses won’t be there next time.
Reliance investors would have liked to have clarity on the future retail deal but that is yet to happen. On the positive side, Reliance is thriving in the retail market. They have added new shops and covered more areas. The benefits of these moves will be seen in the coming years and can be highly profitable.
In a year when companies have laid off people, Reliance has added 75,000 new jobs which shows their commitment to the nation. Data growth and subscriber growth indicates positive signals for the Jio brand but a fall in ARPU overall puts a little dent in their results. On the oil front, there are fresh rumours with Saudi Aramco about the stake sale. Let’s see if all these factors can trigger a substantial stock price movement this week. Till then, be safe and continue reading!