Image: Amit Dave / Reuters
Oil-to-retail and telecom conglomerate Reliance Industries Ltd (RIL) beat Street estimates to post a 28 percent year-on-year rise in net profit at Rs 9,108 crore for the quarter ended June 30, mainly due to improved revenues and profitability from its refining and petrochemicals business. The growth in profitability was accompanied by a 26.7 percent jump in topline to Rs 90,537 crore.
RIL also disclosed that the company’s board of directors had approved a plan to acquire a 24.92 percent stake in media and entertainment company Balaji Telefilms for Rs 413 crore. Balaji Telefilms is promoted by Ekta Kapoor and her family, led by her father and yesteryear Bollywood superstar Jeetendra. Balaji Telefilms is engaged in the production of TV content from broadcasters, production and distribution of films and also operates an over-the-top subscription video-on-demand platform called ALT Balaji.
The acquisition is strategic to RIL’s plans of securing content for its digital services and broadband wireless access platform Reliance Jio, which managed to notch up 100 million subscribers on its 4G telecom network in under six months of its launch, which offers data at low prices.
“We welcome Reliance Industries as a partner in our growth journey towards becoming the preferred content producer for the Indian diaspora across all means of video consumption and across all geographies,” Balaji Telefilms’ chairman Jeetendra Kapoor said in a statement. “This investment is a vote of confidence to the Company’s strategic move to own our IP and our viewers.”
The stake that RIL proposes to acquire, through a preferential issue, in Balaji Telefilms is just short of the threshold (25 percent) that would have triggered a mandatory open offer for further shares of the latter. As on June 30, the promoters held 43.29 percent in the company. After the preferential issue of new shares in the company to RIL, the promoters’ stake in the company will be diluted to around 32.6 percent.
Axis Capital acted as the sole investment banker for this transaction.
RIL’s reported earnings for the first quarter of fiscal 2018, especially for its refining business, was contrary to what analysts tracking the company expected. According to a Motilal Oswal research report RIL was expected to report a decline in gross refining margin (GRM) in the April-June quarter. Instead, the Mukesh Ambani-led company’s GRM improved to a nine-year-high of $11.9 per barrel from $11.5 in the previous quarter, as well as the year-ago period.
According to RIL’s earnings statement, issued after market hours on Thursday, an increase in prices, volumes and margins of its refining and petrochemicals products led to higher revenues and operating profits for the company.
On a sequential basis however, RIL’s revenues declined 2.5 percent and net profit (excluding exceptional items) fell marginally by 0.3 percent. RIL’s reported net profit for the June quarter consists an exceptional gain of Rs 1,087 crore representing profit from the sale of its stake in Gulf Africa Petroleum Corp (GAPCO).
RIL’s GRM outperformed the regional benchmark Singapore GRM by $5.5 per barrel. “Marginally weaker product cracks (margins) environment on a quarter-on-quarter basis was offset by yield shift and robust risk management. Further, favourable Brent-Dubai differential aided crude sourcing during the quarter,” RIL said in its statement.