For much of 2020, Reliance Industries Ltd (RIL) was the toast of the town. Its fund-raising blitz—which saw it raise a combined $27 billion through stake sales in Jio Platforms and Reliance Retail—was an unrivalled display of both ambition and potential. The stock market, however, has since been the sun to Reliance’s Icarus. After the euphoria, the market seems jittery about the company’s famed execution prowess not being able to match sky-high expectations.

The burden of expectations has weighed heavy on India’s most valuable conglomerate, and even in the midst of a roaring bull run, the price of its stock has dropped. From mid-September till date, RIL stock has lost 16.5%, standing in sharp contrast to the 23% gain in the BSE Sensex. The overall weak show in the past few quarters and the stock’s high valuation haven’t helped either.

If the company hoped its December 2020 results—which were announced last Friday—would stem its slide, it was wrong. The stock dropped more than 5% on Monday. 

The market seems glum at the company’s muted financial performance. Consolidated revenue, at about Rs 1,38,000 crore, was down almost 19% year-on-year. Its consolidated operating profit, meanwhile, was flat at about Rs 26,000 crore. The good show put up by Jio Platforms, an investment income boost in the retail segment, drop in interest cost, and low taxes salvaged the company’s bottomline. Without these, RIL’s consolidated net profit would have fallen instead of rising about 12% year-on-year to Rs 13,100 crore.

Many were quick to point to RIL’s oil-to-chemicals division as the reason for RIL’s most recent slump on the bourses. Severely impacted by the Covid-19 pandemic, the division—which accounts for as much as 65% of RIL’s revenue—saw a 28% drop in operating earnings over the quarter ended December 2020. But while Covid’s disruption continues to take a toll on RIL and its ‘growth is life’ philosophy, it’s not the only thing that doesn’t sit well with investors. Indeed, rather than a reaction to what RIL disclosed in its quarterly results, investors are equally put off by what the company didn’t show or tell.

Three strikes

For all the hype that has surrounded Reliance Jio, RIL’s telecom business, since its inception in 2016, the finer details of its financial performance were conspicuous by their absence in Friday’s results. 

Jio is housed under Jio Platforms, RIL’s digital holding company. While other digital businesses, such as its nascent e-commerce play JioMart, could increase their contribution to Jio Platforms in the future, Jio is still the overwhelming needle-mover. It contributed more than 95% of the operating profit of Jio Platforms in the December quarter.

Despite this, for the second quarter running, RIL did not provide granular financial details such as the finance cost and net profit of Jio.

AUTHOR

Anand Kalyanaraman

A certified Chartered Accountant, Anand chose to pack the power of numbers with words when he left a career of seven years in accounting, putting together MIS reports, and investment research to enter journalism. Before joining The Ken, Anand was Deputy Editor at The Hindu BusinessLine, a newspaper he worked at for 11 years.

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