Business

India’s windfall tax hits Reliance Industries

The taxes, levied mid-last year, halted the momentum in Reliance’s oil-to-chemical business built on cheap Russian crude.

Reliance Industries Ltd on Friday reported a bigger-than-expected drop in quarterly profit as India’s biggest company by market valuation took a hit from the government’s windfall tax on fuel exports.

The taxes were levied on exports of petrol, diesel and aviation fuels midway last year, halting the momentum in Reliance’s oil-to-chemical (O2C) business built on cheap Russian crude and high demand for transportation fuels.

The downstream chemical products had experienced margin pressure from excess supply and relatively weak regional demand during the quarter, the Mukesh Ambani-led conglomerate said.

Its consolidated profit fell nearly 15 percent to 157.92 billion rupees ($1.95bn) in the third quarter, with the windfall tax eating into that by 18.98 billion rupees ($233.3m).

Analysts on average had expected profit to drop to 162.58 billion rupees ($1.99bn), according to Refinitiv IBES.

Higher depreciation and finance costs pushed up Reliance’s total expenses by nearly 16 percent to 2.01 trillion rupees, a bigger jump than the company’s revenue growth of 15.3 percent to 2.21 trillion rupees ($24.7bn).

The company also said it was on track to hit production of 30 million standard cubic meters of gas per day next financial year after the commissioning of its deepwater MJ gas condensate field in the Bay of Bengal KG-D6 block.

It expects gas price realisations to remain high in the near term, the company said in a call.

Reliance, which has diversified its businesses over the years to retail, telecom and, recently, green energy, said it approved raising up to 200 billion rupees ($2.4bn) via non-convertible debentures. Net debt as of December 31 stood at 1.10 trillion rupees ($13.5bn).

While its O2C business remained under pressure, Reliance’s telecom arm reported a 28.3 percent rise in third-quarter profit. Its average revenue per user – a key performance metric for telecoms – rose 17.5 percent year-over-year.

The retail segment’s quarterly revenue grew 17.2 percent to a record 676.23 billion rupees ($8.3bn).

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