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Result Highlights

* Revenue:

Consolidated revenue stood at Rs 1496bn (+27% QoQ; +10% YoY) on 21% & 25% sequentially higher O2C &Retail revenues, even as Digital services stood at ‐4% QoQ. Whereas increase in crude to an average of USD 61.3/bbl (3Q: USD 45.2/bbl), coupled with 25‐35% higher Petrochemical prices aided O2C segment; improvement in footfalls and higher bill value aided Retail revenues. 

* Operating Profits:

Consolidated Ebitda stood at Rs 233.5bn (+8% YoY; +7% QoQ), taking the annual operating profit to Rs 807.4bn (‐8% YoY). While retail & digital services at Rs 36.2bn (+41% YoY; +17% QoQ) & Rs 89.5bn (+31%YoY; flat QoQ), were key contributors to annual growth. O2C at Rs 114bn (‐5% YoY; +17% QoQ) , along with retail contributed to sequential growth.  

* Finance Cost:

Finance cost for the 4QFY21 and FY21 stood lower at Rs 40.4bn (‐ 33% YoY; ‐6.5% QoQ) and Rs 212bn (‐4% YoY) on paring down of borrowing.

* Net‐Debt: 

 RIL pared down the borrowing by Rs 1170bn in FY21, and adjusted for fresh proceeds, while the gross borrowing stand at Rs 2518bn, the net‐borrowing stands at  Rs (22)bn (net cash) on account of cash & equivalents of Rs 2540bn.

* Capex:

Capex for FY21 stood at Rs 790bn (FY20: Rs 805bn), primarily investment being in standalone entity (Rs 218bn) and in RJIL (Rs 261bn).

* O2C Segment:

Higher refining & polymer deltas, along with improvement in product sales led to sequential improvement in profitability. Singapore benchmark averaged QoQ higher at USD 1.8/bbl on improvement in cracks across MS, HSD and ATF. In polymers while PE margin was stable, PP (+43% QoQ) and PVC (+9% QoQ) improved. In addition, polymer demand improved by 12% YoY

* Oil & Gas Segment:

The segment Ebitda improved to Rs 4.8bn (3Q: Rs 0.04 bn), on commissioning and ramp‐up of R‐Cluster; field has reached plateau of 12.8mmscmd, ahead of schedule. Satellite field has also been commissioned in Apr’21, two months ahead of schedule. The production in 2HFY22, is expected to reach 18mmscmd, to be supplemented by MJ’s production in 3QFY23. RIL also divested its interest in Marcellus Shale (US) to Northern Oil & Gas (NOG) for USD 250mn cash and optional entitlement for 3.25mn shares of NOG at USD 14/sh.    

* Digital Services Segment:

While the Revenue & EBITDA for JPL stood at Rs 226bn (+18% YoY;  ‐4% QoQ) & Rs 89.5bn (+31% YoY; flat QoQ), the same for RJIL (subsidiary) stood at Rs 174bn (+17%YoY; ‐6% QoQ) & Rs 83bn (+34% YoY; +2% QoQ). Sequential decline in revenue stemmed from introduction of Bill & Keep regime, resulting in an ARPU of Rs 138 (3Q: Rs 151). RJIL’s subscriber base climbed to 426mn, with net addition of 15mn subscribers (gross addition: 31mn). In addition to wireless business RJIL continues to expand footprint in enterprise and home broadband. Also, during 4Q, RJIL concluded purchase of spectrum worth Rs 571bn, through auction and Rs 15bn from Bharti airtel  

* Retail Segment:

Improved footfalls at 88% of pre‐covid level (3Q: 75%) along with higher conversion and higher bill value contributed to all time high Grocery and Fashion & Lifestyles sales. Consumer electronic picked up slack as with higher sales of devices. Digital and new commerce as well contributed ~10% of the sale. As a result Revenue and Ebitda stood higher at Rs 413bn (+20% YoY; +25% QoQ ) and Rs 36.2bn (+41% YoY; +17% QoQ). 

View & Valuation:

We assume coverage for RIL, with a BUY rating and a TP of Rs 2325/sh. At CMP the stock is trading at 17x FY23e, as against 20x implied by our SOTP based TP

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