Oil spike, shipping costs drag Reliance quarterly income

Reliance Industries’ net income dropped 13% y-o-y to INR 169.7 bn (USD 1.8 bn) for the February-April period, with the company flagging “unprecedented dislocation” from the US-Israel-Iran war even as results broadly met expectations, according to its quarterly financial report (pdf). Chairman Mukesh Ambani said the conflict has severely disrupted global supply chains, reinforcing the need for energy security.

Refining hit by oil shock: The core oil-to-chemicals business of India’s largest refiner came under pressure as crude prices surged above USD 100 / bbl and shipping and ins. costs spiked. The effective disruption of the Strait of Hormuz tightened supply, forcing refiners to source more costly crude globally. Margins were hit further as domestic units shifted toward lower-margin LPG production to address local shortages.

Consumer units cushion impact: The impact was partly offset by strong performance in consumer businesses — Reliance Jio and Reliance Retail reported robust growth — with telecom earnings rising and retail expanding store count. Jio’s net income rose 10% y-o-y to INR 73.2 bn (USD 880 mn).

IN CONTEXT- Jio, which counts Abu Dhabi Investment Authority, Mubadala Investment, and Saudi Arabia’s PIF as shareholders, has been eyeing trimming down small fractions of existing equity ahead of its upcoming IPO.

Global sourcing and outlook: Reliance has diversified crude sourcing to countries like Russia, Venezuela, and Brazil to manage disruptions. However, the full extent of the impact will be felt in the current June quarter, with continued geopolitical uncertainty clouding earnings visibility.