Refining records boost Reliance profits, 4G plan on track
Indian oil-to-retail conglomerate Reliance Industries posted a stronger-than-expected quarterly profit, boosted by record refining margins, and confirmed plans to launch a keenly awaited 4G telecommunication service by \"around December\". Reliance, controlled by India\'s richest man and the country\'s second-largest company by value, said on Friday consolidated net profit rose 12.5 percent, even though plunging crude prices dragged revenue down by more than a third.
Indian oil-to-retail conglomerate Reliance Industries posted a stronger-than-expected quarterly profit, boosted by record refining margins, and confirmed plans to launch a keenly awaited 4G telecommunication service by "around December". Reliance, controlled by India's richest man and the country's second-largest company by value, said on Friday consolidated net profit rose 12.5 percent, even though plunging crude prices dragged revenue down by more than a third.
Higher profits came largely from gross refining margins, which rose to $10.60 per barrel, the highest in seven years and up from $8.30 in the same quarter a year earlier. "We use a lot of crudes... You are able to use a market which is massively oversupplied and drive the bargain down. Once you do that, it improves your profitability," co-chief financial officer V. Srikanth told reporters.
"We remain pretty constructive on refining." Reliance shook off an impairment of 26.6 billion rupees ($410.9 million) in shale gas assets, offsetting it with the sale of its investment in a U.S. shale gas joint venture. The company, which generates the bulk of its revenue from refining and petrochemicals, has been expanding into consumer businesses such as retail and telecoms to aid growth. It has spent more than $14 billion to date on telecoms alone, and is spreading into fashion, grocery and online banking.
Reliance's telecoms business is building India's biggest fourth-generation (4G) broadband network and plans a December launch for its Jio brand. It said on Friday it had the network in place and had thousands of professionals testing the system, covering a million kilometres a day.
"We now have close to 10,000 testers in the field, and this is getting enhanced," said Anshuman Thakur, a former investment banker who joined Reliance to advise on telecoms strategy. The company's retail division will also sell its own brand of 4G LTE smartphones under the brand name LYF, pronounced "life".
Reliance said it was in talks with five manufacturers to manufacture the phones, which would be priced "from premium to affordable", at as little as 4,000 rupees, and will eventually be made in India. Cash-rich Reliance's entry into the crowded telecoms sector poses a potential threat for established players such as Bharti Airtel Ltd and Vodafone's local unit.
For India's thriving e-commerce players, however, the arrival of 4G is expected to galvanise business. This includes a new generation of niche banks, including Reliance's own venture. "All of the services we are offering, there are synergies, so we try and roll them out close together," said Thakur, referring to retail, banking and other services.