Retail biz only challenging front for Reliance: Tarun Lakhotia

Even while they have announced a big capex in new energy business, the rollout there would be somewhat calibrated and larger outlay would be seen only in FY23 or FY24 and beyond and not so much so in this fiscal year, says Tarun Lakhotia, Director, Equity Research-- Oil & Gas, Agri-inputs and Chemicals sectors, Kotak Institutional Equities.

What did you make of the Reliance numbers? Will the underperformance of the stock price be reversed finally?
The Reliance numbers were fairly resilient. The oil to chemicals (O2C) segment has delivered a 7% increase in EBITDA sequentially, showing pretty steady volumes and slightly better margins than last quarter.

Jio, delivered pretty strong subscriber additions of 14.3 million along with steady ARPU despite Covid-related lockdowns or restrictions-related issues that they would have faced in this quarter and their EBITDA has also increased by 4%. The upstream segment was a lesser business for them with an increase in volume from the KG-D6 projects. There has been an almost two-third increase in EBITDA from that segment. Retail business has been the only challenging front but there again, the sales for the core segments are still better than the first three quarters of last year.

So clearly, the Covid related impact in each of the businesses have been far less. In retail, the only disappointment was on the margin front where we have seen a fair amount of moderation. That said, the 30-35% growth in new commerce has been fairly strong. The overall performance on the operating front was better than our expectation in most segments. Below EBITDA, there have been positive surprises which led to a strong beat versus our estimate on the EPS front.

While it was all looking good in the numbers – Jio and retail numbers were a miss. Also, there was no fresh update on new energy, the Jio phone plus, the O2C stake sale or for that matter the recent Justdial stake buy as well.
Incremental update on some of these developments has not been much but the last AGM had taken place only a few weeks ago. On the JioPhone, the next update would be closer to their rollout date when we get to know the pricing and the plans that they may offer along with that.

On O2C, again, the transaction may take some more time. I am not sure if one was expecting much development in this quarter. Even while they have announced a big capex in new energy business, the rollout there would be somewhat calibrated and larger outlay would be seen only in FY23 or FY24 and beyond and not so much so in this fiscal year.