Shares of oil-to-retail conglomerate Reliance Industries tanked nearly 9% on Monday and its market cap eroded over one trillion rupees after the company reported a 15% drop in second-quarter net profit. Reliance Industries had made the earnings announcement for the July-September quarter after the market closed on Friday.
On the Bombay Stock Exchange the company’s stock lost 1.19 trillion rupees (US$15.97 billion) of market evaluation as the stock tumbled 8.62% to close at 1,877.30 rupees. It had earlier touched an intra-day low of 9.46% to 1,860 rupees. Macquaire Research has given an “underperform” rating for the stock with a target price of 1,320 rupees, expecting a further slide.
The sharp drop in the stock shaved off $6.8 billion from Reliance Chairman Mukesh Ambani’s net worth, and pushed him down from sixth place on the world’s rich list to ninth place, with his net worth down to $71.5 billion, Economic Times reports.
During the second quarter, Reliance Industries saw its core business of oil and petrochemicals come under pressure due to the Covid-19 pandemic, while its consumer-facing businesses fared better as the government eased lockdown measures. The company posted a net profit of 95.67 billion rupees ($1.28 billion), down from 112.62 billion rupees in the same period last year.
It had reported a 36% fall in revenue from its refining business and a 23% fall in revenue from its petrochemical business. The disruption of global travel due to the coronavirus had hurt the sales of gasoline, diesel and jet fuel.
Its retail business also suffered a 4.9% drop in revenue as fear of the virus kept shoppers away. For the second quarter Reliance was able to keep 85% of its stores open as the government eased the lockdown.
But Reliance’s telecom arm Jio Platform posted a three-fold jump in its net profit to 28.44 billion rupees, as against 9.9 billion rupees in the year-ago quarter. The company’s subscriber base crossed 400 million and its average revenue per user rose to 145 rupees from 127 rupees last year. However, the average revenue per user is less than that of its rival Bharti Airtel (162 rupees).
Since April, Reliance Group has raised 2.5 trillion rupees ($33.56 billion) from its stake sale in digital and retail units and a rights issue. The company has already received 1.76 trillion rupees ($23.63 billion), thereby helping it achieve zero debt status. Prominent investors include Facebook, Google and some well-known global private equity firms.