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Reliance Industries (RIL) on Friday announced its results for the October to December quarter of 2022. Its consolidated net profit after tax came in at ₹ 15,792 crores, down 15% year on year (YoY) and its revenue increased 15.3% YoY to ₹ 2.20 lakh crores. In addition, its board approved raising ₹ 20,000 crores through non-convertible debentures. 

The oil-to-telecom major’s mainstay oil-to-chemicals (O2C) business rose 10% year on year to ₹ 1.44 lakh crore. Its business made up more than 65% of RIL’s consolidated topline in the quarter. 

Reliance Retail Ventures reported a 6.2% YoY growth in consolidated net profit to ₹ 2,400 crores. Its revenue increased 17% YoY to ₹ 63,623 crores. The consolidated net profit of Jio Platforms rose 28.6% YoY to ₹ 4,881 crore, and revenue increased by 21% to ₹ 24,892 crore. 

The conglomerate’s Q3 numbers were mostly ahead or in line with analyst expectations, however, a few brokerages have cut down their earnings per share estimates for the company, flagging concerns. 

Reliance in its earnings call said that it has a net debt of about ₹ 1,10,000 crores versus ₹ 93,000 crores in September, largely on the back of capital expenditure for 5G rollouts and the ramping up of its retail operations. Analysts say that the debt has increased significantly, i.e., by 18.27% as compared to the previous quarter. 

Its capital expenditure saw an increase by 16 percent as compared to ₹ 37,600 crores in the September quarter. In addition, Reliance Retail added another 6 million square feet, taking the total store count to 789 stores and indicating an aggressive expansion strategy. 

V Srikanth, Jt. CFO, Reliance Industries said, “I just wanted to highlight that when you look at Rs. 1,10,000 crores of net debt, it is significantly lower than the annualized return that we have.” 

As far as Reliance Jio is concerned, its Average Revenue Per Unit (ARPU) improved by a rupee to ₹ 178.20 from ₹ 177.20, however, the management did not give clarity on any subsequent tariff hikes. 

IIFL Securities in a note stressed on Tariff hike as the recently launched 5G networks will require significant investments. 

According to a report by CNBC TV 18, analysts have cut the company’s earnings per share estimates either for the current financial year or the next. 

Nomura has cut its current year EPS estimate by six percent, to factor in a lower operating profit from Jio. However, it has retained its next year EPS estimates.Meanwhile, CLSA has cut RIL’s next year Earnings per Share estimate by eight percent on the back of delaying tariff hikes, rising interest rates and depreciation due to higher capex. 

Even though brokerages cut the company’s EPS estimates, they have a sanguine outlook. ICICI Direct has a buy rating on the stock with a target price of ₹ 3050. This translates to an upside of 25.62% as compared to its share price of ₹ 2,428.00 apiece on Monday. 

It said that tariff hikes taken by Jio will be a key monitorable. Further, the O2C segment is likely to improve as higher middle distillate cracks would help strengthen GRMs along with a rebound in petchem demand. 

Written by Simran Bafna 

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