Not all is well with RIIL, net profit of Q3 falls 26% dragging down the stock

Mukesh Ambani led Reliance Industrial Infrastructure Limited (RIIL) reported a tepid set of Q3FY16 numbers after the market closed on Wednesday.

RIIL is an infrastructure company engaged in the business of setting up industrial infrastructure; providing transportation of petroleum products; hiring construction machineries; information technology support services etc.

RIIL reported a decline in revenue by 3 per cent in Q3FY16 compared to the corresponding quarter of previous fiscal. Revenue decreased to Rs 22.13 crore from Rs 22.71 on a yearly basis. The decline in revenues can be attributed to the overall weak sentiments prevailing in the Oil and Gas industry, which is a major business for the company. Operationally the company posted a 14 per cent decline in EBITDA Y-O-Y, signifying a poor performance from an operating stand point. EBITDA stood at Rs 5.52 crore from Rs 6.41. Company saw its employee cost rise by 20 per cent on a yearly basis to Rs 4.09 crore from Rs 3.4 crore. Employee cost in terms of total revenue increased by 300 basis points to 18 per cent Y-O-Y. On the margin front too company faced pressure as it dropped by 300 basis points to 25 per cent for the quarter ending December compared to the same period before. Company’s PAT decreased by 26 per cent on a yearly basis. RIIL reported a net profit of 3.96 crore in the third quarter of FY16 from Rs 5.32 crore in the same period last fiscal.

During the 9-months ending in December, RIIL achieved Total revenues of Rs 75.68 crore, an increase of 1.73 per cent, as compared to Rs 74.39 crore achieved in the corresponding period of the previous year.

On a sequential basis RIIL revenues increased marginally by 3 per cent to Rs 22.13 crore in Q3FY16. EBITDA declined by 11 per cent Q-O-Q (quarter on quarter) as expenses increased Q-O-Q by 9 per cent. Sequentially PAT decreased by 5 per cent to Rs 3.96 crore from Rs 4.17 crore.

Company is likely to face pressure as substantial revenue comes from the Oil and Gas space which is currently going through a turbulent phase with global growth uncertainty, ultimately leading to drying up of any new investments in the sector for the time being.

Reacting to the news the stock corrected more than 4 per cent in the early hours of trade at Rs 433.50. Anticipating a poor set of Q3 numbers the stock fell around 4 per cent in the last trading session before the results were announced.

According to the company statement, RIIL continues to provide infrastructure support services, namely transportation of petroleum products and water through pipelines, construction machinery on hire and other support services to Reliance Industries Group, with a substantial portion provided to Reliance Industries Limited.