The ongoing lockdown and the fall in global crude oil prices have hit the finances of Reliance Industries, run by India’s richest man, Mukesh Ambani.
The oil-to-telecom conglomerate posted a 38.7% year-on-year decline in its consolidated net profit at 63.48 billion rupees (US$840 million) for the quarter ended March 2020. It posted a profit of 103.62 billion rupees ($1.37 billion) in the same period last year.
The company said oil prices had declined 73%, impacting the inventory valuation. This has led to an exceptional loss of 42.45 billion rupees ($560 million) for the quarter.
Revenue from operations stood at 1.39 trillion rupees ($18.43 billion), down 2.30% from 1.42 trillion rupees in the previous year, while sales and services revenue declined 2.5% year on year to 1.51 trillion rupees ($20 billion).
The company is seeking to eliminate its debt by March next year. At the end of last year Reliance’s outstanding debt was $43 billion. It spent as much as $50 billion to propel its telecom business Reliance Jio to the top position in India within three years of starting operations, surpassing existing players Bharti Airtel and Vodafone Idea.
For this quarter, Reliance Jio’s standalone revenue from operations, including access revenues, increased to 148.35 billion rupees. Its standalone net profit came in at 23.31 billion rupees during the quarter and at 55.62 billion rupees for the full year, showing an annual increase of 88%.
Recently social media giant Facebook announced it would invest $5.6 billion to acquire a 9.99% stake in Reliance’s digital subsidiary Jio Platforms.
Reliance also has plans to sell a 20% stake in its refining and petrochemical business to Saudi Aramco for $15 billion. But it is now facing legal hurdles for not honoring an earlier international arbitration award.
Reliance announced it would reduce the salaries of some of its employees in the hydrocarbon division. The company cited the “adverse impact” of the coronavirus pandemic as the reason. Chairman Mukesh Ambani has decided to forgo his entire compensation for the year, the Business Standard reported, quoting an official letter.
Employees earning more than 1.5 million rupees a year will have to take a pay cut of 10%, while the company’s directors will be drawing 30-50% less than the previous year. The annual cash bonus and performance-linked incentives have also been deferred.
The letter said the company would “closely monitor the economic and business environment” and re-evaluate its response to the situation on a continuous basis “to improve the earning capacity” of the business, the daily added.