Shares of Reliance Industries fell as much as 3% following the conglomerate’s report of first-quarter profits that fell below analysts’ estimates, primarily due to weak performance in its energy and retail segments.
The company’s results were significantly impacted by lower margins on fuel sales, while sluggish discretionary spending affected the retail division. V Srikanth, the company’s chief financial officer, noted that the fashion and lifestyle segment faced lower demand.
Despite higher footfalls, retail revenue growth reflected a continuation of a slowing trend seen in the previous quarter, with a reported 7% revenue growth that fell short of several analysts’ expectations. Ambit Capital analysts highlighted that the retail segment continues to struggle due to a lack of support from the macroeconomic environment.
HSBC analysts indicated that the oil-to-chemicals segment is likely to remain lacklustre due to the weak margin environment and new refining capacities being commissioned.
While Reliance shares have increased by 17.6% this year, compared to a 13% gain in the NSE Nifty 50 index, the moderated capital expenditure in the first quarter, coupled with retail’s sluggishness, may temper investor optimism, according to Ambit analysts.
ICICI Securities also projected that oil-to-chemicals earnings for this fiscal year are expected to remain muted, given the weaker first quarter and uncertain margin environment for the remainder of the year, which could weigh on the company’s overall earnings.