Rs 177 is the ARPU number which has come in. It looks like a miss but then the Street was already expecting a weakish number this quarter. What would your reaction be?
Absolutely, the expectation largely was that numbers will be soft for Reliance. The O2C business has probably justified that stance. The large expectation of the Street was anywhere between Rs 32000-32500 odd crore in terms of consolidated EBITDA and that has clearly surpassed with the consol EBITDA coming at Rs 34653 crore. The retail business has fired up on all engines and along with that the ARPU number that you just mentioned is around the expectations as well. The most bullish expectations were around Rs 180-181 but Rs 177 should be an acceptable number. O2C slowdown was expected because of shutdowns. There were a few refinery shutdowns as well which happened in the energy part of the business and Singapore GRMs obviously had come down quite significantly in the past quarter. So, on those lines, retail has performed exceedingly well in the quarter gone by.
The commodity end of the businesses had some factors at play — GRM dipped, O2C product pricing was all over the place and so is the windfall tax. Do you think it can normalise in the coming quarter and should be seen as a one-off weighing on the numbers?
So, specifically, on the energy part of the business, I think how the Singapore GRMs perk up is going to be very important. But there were a couple of factors even on the energy part which should normalise going forward. The product cracks obviously had gone down quite significantly, there were refinery shutdowns which will not happen in the next few quarters and windfall fuel export tax also had its fair bit of an element in my opinion. Now, with the product cracks expected to normalise refinery shutdowns not being there and Singapore GRMs also expected to normalise because of all the measures that OPEC, non-OPEC are probably taking, the next few quarters at least on the energy part of the business would not face challenges like they did in the quarter gone by. As you rightly pointed out, the consumer part of the business has done really really well.
Rs 4000 crore impact the company says has been purely due to the new tax along with some other global volatility in their O2C business. How do you see this because there is no clarity yet on whether the new tax is going away in a hurry? Could this continue to remain an overhang on the stock?
It will have some element of impact at least for the remainder of this financial year. Crude prices finally settled down over the next few weeks and months but clearly if you look at the sequential performance and if you map the last two to three quarters, the segmental revenue was outstanding because of elevated Singapore GRMs. Because of shutdowns, a significant hit has been taken both in terms of the absolute number as well as the reported margins.
Reliance has got ample opportunities as we all in terms of their feedstock options and therefore I think they will be relatively better off even in terms of the petchem part of their business going forward. The next few quarters might be a recoup kind of quarters specifically for the O2C business but I think it should come back very very strongly from the next financial year.