Strong refining cracks lift Reliance outlook as retail margins fall
Surging refining margins driven by Russian supply disruptions are bolstering Reliance Industries' outlook, even as aggressive investments in quick commerce push retail profitability to a 15-quarter low.
Reliance Industries is projecting a stronger near-term outlook on the back of a sharp expansion in global refining margins, even as its retail division faces sustained profitability pressure from an aggressive expansion into quick commerce.
International product cracks widened dramatically during the quarter, with the petrol margin jumping to $26 from $10 previously. Gasoil and aviation turbine fuel margins surged even further, climbing to $60 and $62 from $16 and $14 respectively. Company officials indicated on an earnings call that these spreads are expected to remain elevated due to ongoing Russian supply disruptions, presenting a significant windfall for the conglomerate's oil-to-chemicals business.
To capitalise on this environment, Reliance plans to run its refineries at peak utilisation by sourcing crude from diversified suppliers. Management added that the company will use its integrated platform to shift production toward higher-margin petrochemicals whenever market economics allow.
That refining strength is helping to offset a notable weakness in the company's consumer-facing businesses. The retail segment's operating margin before depreciation and amortisation dropped to a 15-quarter low as the company prioritises capital expenditure over short-term profitability. Over the next nine to twelve months, Reliance is focused on rolling out dark stores to capture market share in the quick commerce sector.
Meanwhile, the telecom division is forecast to deliver volume-led growth without the benefit of tariff increases. Looking further down the energy value chain, the upstream business is entering a new investment cycle to halt production declines. A new drilling rig will arrive next month to initiate exploration in the KG Basin, kicking off a multi-year programme designed to replenish reserves and sustain output.
The company is also hitting milestones in its clean energy transition. Annual production capacity for integrated solar modules and cells has reached one gigawatt at the Jamnagar Green Energy Giga Complex. Additionally, Reliance remains on track to commission its first 40 GWh battery manufacturing facility this year, keeping pace with its long-term diversification strategy.
