O2C, exploration likely to drive RIL's Q3: Analysts

Mumbai: Oil-to-chemicals (O2C) and the exploration & production (E&P) businesses are expected to drive earnings for Reliance Industries (RIL) in the third quarter of this fiscal, analysts said.

India's largest company by market capitalisation will report its results for the quarter ended December on Friday.

The company board is also expected to approve plans for fundraising through the issuance of non-convertible debentures (NCDs) on a private placement basis at its meeting, the company said in a regulatory filing.


According to a Bloomberg poll, RIL is expected to post a consolidated net profit of ₹16,366.7 crore (four analysts) on net sales of ₹2.29 lakh crore (11 analysts).

JP Morgan, in a research report, said, "We forecast most of the quarter-on-quarter earnings growth to be driven by O2C, as the SEZ export tax removal benefits O2C and E&P segments as the higher prices flow through from October onwards. We expect retail and digital to report muted sequential earnings growth."

O2C - which comprises refining, petrochemicals (petchem), and fuel retailing - contributes nearly 60% of RIL's consolidated revenue and 50% of Ebitda. Retail and digital, on the other hand, account for 34% of revenue and nearly 45% of Ebitda.

The average price of Brent crude oil between October and December 2022 was around $88 per barrel, 11% lower than the average Brent crude price of $100.5 per barrel in the previous quarter, according to Bloomberg. In comparison, the average price of Brent crude was at $79 per barrel in the December 2021 quarter.

Goldman Sachs, in a report, said it expects RIL's core Ebitda to grow by 15% quarter-on-quarter and by 21% on-year, "driven by sequential improvements in refining margins and domestic gas prices offsetting weaker petchem margins".

The weakness in the global energy/chemical prices and lack of telecom tariff hikes have, however, pulled the brakes on positive earnings revision for RIL in the last three months, it added.

"We expect 3QFY23 net GRM of $16.1/bbl (+14% QoQ) fuelled by growth in middle distillate/naphtha cracks (+2%/+38% QoQ) as well as easing crude premiums and lower windfall taxes," Goldman Sachs said in the report.

While the telecom segment is expected to clock moderate growth sequentially, it is expected to see a slowdown in subscriber additions, with 7.4 million net adds in the December quarter, down from 7.8 million in the September quarter, due to continued muted smartphone additions in the industry.

The retail segment may see moderate growth in line with the general slowdown seen in middle-income discretionary consumption in India post-Diwali festive season.

RIL’s scrip ended at 2,471.10, down 0.14% on the BSE on Thursday when benchmark Sensex ended 0.31% lower.