Reliance Industries Ltd

NSE:RELIANCE

Earnings Call Transcript 2021-Q3

[B. Srinivasan]

Good evening, and thank you for your patience. Sorry to keep you waiting. Welcome to the presentation on Reliance's financial and operational performance for the third quarter financial year 2021. Mr. Srikanth will start with the consolidated financial performance; and followed by Kiran Thomas and Anshuman Thakur, who will take you through the Jio performance for the quarter. Dinesh Thapar will take on today to talk about the Retail segment, and Sanjay Roy will talk about the E&P segment. Then Mr. Srikanth will come back and talk about both the O2C segment as well as [indiscernible]. Over to you, Srikanth.

[Srikanth Venkatachari, Joint Chief Financial Officer]

Thanks, Srini, and good evening to all of you. So a very quick set of slides on the consolidated financial performance. Starting with revenue INR 1,38,000 crores, up 7%, and this is primarily led by the O2C segment on the back of higher volumes and realization. EBITDA is higher by 12% at INR 26,100 crores. And this is on the back of strong operating performance by all the segments. And if you see the split, about 56% of the incremental EBITDA came from Retail and Jio. We also continue to see a sharp fall in finance cost at INR 4,326 crores, which is almost 29% lower. And even if you compare it to what was in Q1, the fall is even more sharper. This is on the back of all the capital flows that came in, and we have used it to run down our liabilities. We also -- the tax rates are low, and this is -- we talked about last time, too. This is due to the reduction in the effective tax rate for the year. All this means that our net profit at INR 14,894 crores is up 41% on a quarter-on-quarter basis and 26% on a year-on-year. And this number does include exceptional item of INR 121 crores, which is a net impact of impairment of U.S. shale assets of INR 15,691 crores, and recognition of corresponding deferred tax assets. There are detailed notes are provided in the releases. So the next slide, please. This is the split of -- slides have changed?

[B. Srinivasan]

Not for me. Yes, now it's changed.

[Srikanth Venkatachari, Joint Chief Financial Officer]

Yes. So this is the split of EBITDA by business, and you can see O2C up 10% and consumer business is up 16%. Retail, sharp improvement and Digital Services, at about 8,942, which is 7.2% higher. Clearly, on O2C side, we have seen demand revival. And also these downstream product deltas have been very strong, and this, in some sense, helped to negate the weakness in the fuel market. On the consumer side, Jio earnings EBITDA continues to grow on the back of subscriber addition as well as higher ARPU. The Retail benefited from a sharp rebound in fashion and lifestyle and also with the investment income on the capital raise that happened. Overall, consumer businesses now account for 51% of the EBITDA. It was 37% a year ago. Next slide, please. Just one slide on each of the businesses before I hand it to my colleagues. So for us, the key milestone is a run rate of 10 billion annualized run rate for Jio. And as I mentioned, strong revenue growth, EBITDA growth on the back of both subscriber addition and ARPU. ARPU now at 151 versus 145 last quarter. And also a significant increase in customer engagement. Overall, we have about 411 million customers as of December. And also FTTH business continues to scale up fairly very rapidly. So in short, strong financial metrics and also healthy consumer engagement lift, explaining the growth. On Retail, this is very strong performance even when you look at the operational context in which it was there. Clearly, the benefit coming from fashion and lifestyle, which got back to pre-COVID levels. From a revenue standpoint, revenues were dragged down because of the transfer of fuel retailing to the O2C business and also some of the one-off factors in the grocery business. We have now more than 12,000 stores, and we continue to build our digital and e-commerce. And the performance, I would say, has been pretty steady when you add on-store and digital e-commerce. On O2C, clearly benefiting from healthy product deltas. Some of the deltas that are multi-year high. We did well in terms of feedstock procurement as well as product yield shifts. We saw feedstock throughput at about 18.2 million tons, which is 8.3% higher quarter-on-quarter. So that, along with higher product realization benefited us and along with, of course, demand. When you see all the categories of demand across the board, oil demand up 19% Q-o-Q. Polymer, up 8% Q-o-Q. Polyester, up 38% Q-o-Q. Basically, all of them takes demand well above pre-COVID level, maybe a bit lower on the oil demand side, which is at 99%, but otherwise, very, very strong growth in demand. And when you look at the key segments, be it health, hygiene, [indiscernible] pipes, especially irrigation and construction, all of them close to 15% growth. This really explains why our quarterly EBITDA grew by 10.3%. Moving to the balance sheet. Our -- this quarter, we received INR 73,502 crores. And with this, we have completed the capital raise of a lakh and INR 52,000 crores in Jio platforms and of INR 47,300 crores in Reliance Retail. With this, the total cumulative inflow -- cash inflow for the year has been 2 lakh 20,000. This is essentially both JPL and Retail plus rights issue plus the asset monetization on fuel retail. And we have another INR 40,000 crores of rights issues to be received in 2031. I think if we take all that into consideration, we are net cash positive of close to INR 3,000 crores. So with this, I'm going to hand over the -- to Kiran and Anshuman.

[Kiran Thomas]

Thank you. Thank you, Srikanth. Hopefully, everybody can hear me. I think if you look at where Jio has come, especially JPL, it has literally been founded on a twofold promise. One is providing the best world-class connectivity solutions where the promise of connecting everybody, every place and everything, that journey continues. I think on mobility, we continue to be, by far, the leader in mobile broadband in India. And as Srikanth mentioned earlier on fiber, the journey is really picking up now as we come out of the lockdowns that we have had. And as we're picking up momentum, we are already the largest fiber provider in the country. And we have just gotten started. And on connecting things, obviously, things like narrowband IOT, et cetera. Now it's already pan-India available and I will speak a little bit about some of the IoT solutions that they are rolling out on the back of that. And the most exciting frontier for us is the fact that we are at the cusp of 5G, where we're doing something truly special. On the other side, the second pillar for our growth is what we call Digital Solutions, which are built on top of the digital connectivity infrastructure. There we talk about device solutions as well as software solutions, which are appropriate, both for individuals, small businesses, enterprises and obviously, covering very, very crucial areas like education and health care. All of those solutions are nearing launch. We are going through some internal [indiscernible] so we'll have a very exciting future as we enter those verticals. You see the logos on top, obviously, that is a lineup of all the solutions, Digital Solutions, which are already in the market. Many of them have been running now for close to 4 years. And especially the media properties are all multiple hundreds of users on a monthly basis. So they're doing well. Next slide. I think I spoke about 5G. Obviously, we are, by far, the leader in India when it comes to 4G broadband. We have no legacy, all-IP, modern network easily upgradable to 5G because the architecture did -- connected from day 1. But in 5G, I think the true differentiator that we are really bringing into the market is the fact that almost the entire 5G solution, in addition to being an operator, the entire solution has also been developed internally. Everything from the radio technology with respect to macro base stations with respect to small cells, indoor cells. I think the full gamut of those solutions are being developed internally as well as the entire core software network, which, as many of you may know, is now built on cloud-native principles from day 1 have also been developed internally through JPL. Many of them have already undergone successful field trials. And what you see here are some of those numbers, like on wireless, we have demonstrated that we can deliver 1 gigabit per second from a single cell, as can be seen here on the picture on the right. So end-to-end solution for 5G as well as the fact that we have the ability to take that solution and roll it out pan-India because of the infrastructure that we are already having in place as well as the operational ability to reach them to customers and to get market adoption. I think that will be a true end-to-end capability that Jio can demonstrate in the coming months. When it comes to home, as I mentioned, even though we are just getting started, we have already become the largest fiber service provider in the country. But obviously, we see the opportunity to be growing this business by orders of magnitude as we look forward into the coming quarters. If you see this particular slide, on the left-hand side, are all the solutions, which are being enjoyed by current set of customers everything from the set-top box to the -- to obviously, the fiber and the Wi-Fi terminals, which brings connectivity to the home. All the best applications, media applications that they can think about are already supported on the set-top box which U.S. developed internally. And you can see the lineup here, everybody from Amazon Prime to Netflix to the Disneys to a full lineup, including popular applications like YouTube and Facebook Watch, et cetera, are also now available on the Jio set-top box. This is just the most prominent among more than 200 applications from independent app developers also available now through the set-top box. So we literally is really creating a smart device for the home, connected to the large television in the home. And when you look forward, what is coming just down the road are another slew of what we call Smart Home solutions, everything from smart speakers to home IoT solutions to a series of other large screen experiences, especially things like gaming, which are, again, being just around the corner with respect to being introduced. We go to the slides. Hello. Yes. Thank you. Similarly, just to double-click on some of those solutions, the Jio set-top box again is a story where the hardware design, the operating system and the entire set of software solutions that go in other than, of course, the independent developers who contribute -- continue to contribute, but the entire platform has been developed internally while it is already delivering a lot of value to our customers, but there's a pipeline of innovations which I mentioned -- a few of the prominent ones I've mentioned here. Really strengthening the virtual assistant, which is a voice-based assistant, which really makes it grandma-friendly for anybody to speak to a microphone and to get things done on a TV, which is 10 feet away. Now already supported in 6 Indian languages and obviously, 7 more are being developed. So literally, it will become truly built for India solution where anybody in any part of the country can really interact with this device in a very intuitive and friendly way. Everything from creating the next set of smart solutions vis-à-vis recommendations that we can make so that there is better discovery of all the solutions that we have built on the set-top box. The first step towards really monetizing this asset through advertisements and other ecosystem monetization opportunities that we can unlock in the living rooms of really affluent homes who are adopting the fiber solutions. In addition to that, of course, really making it very intuitive with respect to notifications and ability for multiple profiles because the living room is a shared facility, and there are multiple members who all would want to interact with this. So there's a really rich set of functionalities, which are also being [indiscernible] in the coming days. The Home IOT, I just mentioned, again, everything from monitoring solutions, energy monitoring, all the smart devices that you can see represented here, smart lights to smart cameras, to really deliver security and other notification solutions, temperature sensors, motion sensors, water leak detectors, smart plugs so that you can literally turn on and turn off appliances with the click of a button or even program it. Digitally, everything that you would want to conceive of to convert an Indian home into the -- and bring them up to speed or up to par with the smartest homes anywhere in the world. I think the entire set of solutions now are being developed by Jio, and this will be obviously made available to the market pretty soon. Next slide, please. I think the next area where I think we are really focusing is what I call the enterprise solution, a very attractive opportunity for us. Especially within the enterprise opportunity, I think we are very excited by what we can do for small and medium businesses, which is largely a white space when it comes to digital solutions. What we have done is really put together what we call an SMB bundle, which is everything that a small business would need to really operate their business. And all of these are solutions which are already available or very close to being offered in the market, everything from high-speed Internet, both mobility as well as fixed, to communication solutions, which are IP Centrex’ and other conferencing type solutions to tools like JioMeet, which bring together the collaboration that these small businesses need. So our partnership with Microsoft really bringing the power of Microsoft 365 as an integrated bundle with the best value that can be availed by these small businesses who are obviously price-sensitive. And when it comes to taking these solutions and making it visible, a simple solution through one of our start-up partners to really set up a website for any business with a few clicks within a few minutes, call Jio Online. And of course, there are certain types of businesses where infotainment is important for the customers who walk into those devices. So obviously, our home solution, a variant of that through Jio tv+ again, becomes relevant for the small and medium businesses. And again, bringing our sister company through Reliance Digital to create a very unique set of offerings vis-à-vis discounts, warranties, very high-touch set of services for all the devices that the small business may require. These are common set -- the common denominator services, which we are already making it available in the market. And in the coming days, obviously, very industry-specific solutions will also follow, focus on certain industry verticals. JioIoT. I spoke about Home IoT, but now this is really IoT outside of the home context. So smart vehicles, I think these are solutions which are already being piloted in the market with leading auto OEMS. We have had a number of wins in the past 2 quarters, and there's a rich pipeline of partners who are lining up already to now adopt JioIoT solutions, which is a combination of both hardware solutions as well as network solutions, combined with cloud hosting solutions to really power or collect data and analyze and integrate the information, which is being generated by these IoT devices. So everything from connected vehicles or smart vehicles to smart energy metering, where we are working with a number of electricity distribution companies as well as OEMs who are creating some of these smart meters. The Smart Cities solutions, where things like smart lighting and smart utilities, water utilities, et cetera, again, working with a number of municipal corporations. Connected assets, especially things like diesel gen sets and storage facilities where the operating conditions have to be monitored continuously. Again, we have built modules which have been piloted in the market. And smart hospitality where solutions, which are built for monitoring the conditions where these hospitality providers are looking to provide the best of environment and best of solutions to their own customers. Again, we are enabling it through some of our IoT solutions. So all of these broadly categorized under either industrial or Smart City IoT solutions, which we are already piloting with a number of marquee partners across the country. And when we look forward to the coming quarter, again, there's a pipeline of partners who are lining up to adopt these solutions. At this point, I can hand it over to Anshuman, who can speak about the operational performance of Jio.

[Anshuman Thakur]

Thank you, Kiran. Good evening, everyone. I'm going to take you through the operating and financial highlights for the quarter for Jio. For the quarterly highlights, this was one of the milestone quarters for us. We achieved annualized revenue run rate of USD 10 billion. The JPL consolidated operating revenue was INR 19,475 crores with an EBITDA of INR 8,483 crores. And the RJIL revenues were at INR 18,492 crores, which is up 32% year-on-year. We saw a very healthy subscriber addition, gross addition of 25.1 million. We ended the quarter at 410.8 million subscribers. There were impact of COVID-related and local issues during the quarter, which resulted in higher churn. I'll just update you on that. But we see those impacts subsiding now. So things have been stable lately. The FTTH business has been scaling up fairly rapidly, as Kiran spoke about. We are offering our services across several hundred cities across the country. There is significant demand for these services, and that's just getting proven in every new city that we are launching our services and very strong customer adoption. We have some restrictions on account of COVID. But as those are getting eased, we are able to ramp up our pace of customer addition. The ARPU for the quarter increased to INR 151. If you recollect, this was INR 145 in the previous quarter, so 0% increase in the ARPU, a reflection of much higher engagement that customers had on the networks. So all in all, sustained momentum in financial and operating performance for the quarter. If you look at the engagement, customer engagement and really a good proxy for that is the overall data traffic on the network. So the quarterly data traffic has been showing a healthy increase quarter-on-quarter. We -- this quarter, we had INR 1,586 crores GBs on the network. So improvement -- consistent improvement over the previous quarters. ARPU, as said, was INR 151 and 25.1 million gross adds. So the engagement -- customer engagement parameters and customer popularity parameters, I should say, we have done well on most. Customers continue to like Jio for the services that we provide to them. Our aim has been to connect everyone everywhere, and this is across the country. We continue to gain customer trust and customer loyalty. We have market leadership in 18 out of the 22 circles as of September '20, based on TRA data. And we are a close second in Tamil Nadu and Jammu and Kashmir. The wider reach of our LTE network as well as very deep channel presence helps us get to our customers. And of course, the quality of service and the value proposition is what is attracting most customers to us and continues to do that quarter after quarter. We -- our network performance has been fairly steady despite the increase in the data consumption of the network and the number of customers. And we continue to improve that as well through various initiatives that we've been taking consistently to keep improving our network performance. And of course, Kiran spoke about the rollout of 5G over the next few quarters. But on the existing network as well, we have been consistently adding more capacity and maintaining and, in fact, improving the quality of our network. Coming to RJIL's financial performance, which continues to be very healthy. Over the last 1 year, revenues have gone up 32.4% to INR 18,492 crores this quarter and a 45.8% year-on-year growth in EBITDA, which was at INR 8,166 crores during the quarter. EBITDA margin increased to 44.2%. So that's over 4% increase in the last 1 year. And we've spoken in the past about the operating leverage of this business as new revenue lines kick in and start getting ramped up, we see that playing out quarter after quarter. This was a milestone quarter with us hitting annualized revenue run rate of $10 billion. A summary of the key operating metrics that we report every quarter. Subscriber base at 410.8 million, net adds of 5.2 million against the gross add of 25.2 million, and that was really on account of COVID and local issues that we faced. But most of those are now getting better. ARPU improved to INR 151 and the per capita data and voice consumption were both very healthy, data consumption at 12.9% on a significantly higher subscriber base. And voice consumption at 796 minutes per consumer per month. Overall, voice traffic on the network grossed 10.6 billion minutes a day. And at the end, summarizing the JPL consolidated financials, the Jio Platforms Limited, which had operating revenues of INR 19,475 crores and EBITDA of INR 8,483 crores with net profit at INR 3,486 crores. That's a 15% Q-o-Q increase in the net profit. So across all of the financial metrics, we had strong sequential growth. JPL, of course, is less than 1 year old as an entity, and therefore, the Y-o-Y numbers are not represented here. So that was a quick summary of the financial performance. I'm going to invite Dinesh now to speak about the Reliance Retail results.

[Dinesh Thapar, Chief Financial Officer]

Thank you, Anshuman. Good evening. Let me start with the key messages for retail. To start with, the operating environment remain challenging, and I'm going to talk about these in some level of detail as we go forward. But from a headlines perspective, the environment still remains very challenging both on COVID-related restrictions and a host of local issues that impeded business. Profit delivery, profit was an all-time high for Reliance Retail this time. And if you would have had access to the results, you would have seen that, primarily coming on the back of a very strong recovery in our fashion and lifestyle business, which is by far, the most profitable part of our Retail business. And we continue to make very steady progress on expansion across stores, expanding many more stores. Our digital commerce business, which we had embarked upon with greater vigor as COVID set and really expanding merchant partnerships across geographies. Next. So talking about the operating context. Our stores continue to operate under restrictions, although it's been getting better quarter-after-quarter, quarter 3 better than quarter 2, quarter 2 better than quarter 1. But we had about 96% of our stores, which were operational, clearly better than the 85% that we had preceding quarter. But the important part is that 52% of them were fully operational, which essentially meant that the balance were operating with some form of limitation, limitations on operating hours in terms of footfalls. So really constrained in some way. Overall footfall hasn't quite recovered to pre-COVID levels as yet. It's still at 75% and pretty much at par with the last quarter. And within businesses, if you look across businesses and across store formats, fashion and lifestyle and mall stores is where it is still significantly lower. The good part is malls have opened up. Traffic is starting to come back. But even as of December, we had only 50% footfalls in mall stores. Our small towns and cities are recovering faster. And clearly, seamless operations across the supply chain network and stores were disrupted by a host of local issues and disturbances and stores were remaining shut. So that has had an impact and created some challenge in the course of this quarter. So overall message, I'd say, is a gradual recovery, but impacted in some pockets. From a revenue standpoint, if you deconstruct our revenues, really, I think the star performer for the quarter has been fashion and lifestyle. It has led the way. It has surpassed 3 COVID levels, and this has come on the back of the fact that footfalls in this business continue to remain a third lower than where they were pre-COVID. So that's a strong comeback on that business. The continuing grocery business and electronic stores are in a sustained growth track. In fact, they continue -- on the continuing business, they continue to deliver double-digit growth. Now I use the word continuing because clearly, in the grocery business, we've had a set of one-offs that I'm going to talk to you about after this. But our overall reported revenues have been dragged down by the transfer of the Petro retailing business, which used to be a part of Reliance Retail's results. That's been transferred out to the Reliance BP JV. So a separate entity, and that has meant that we've taken a revenue hit of what used to be recorded on the retail books. The second thing we did was to take a very conscious decision keeping the longer-term view to really transition our Reliance market stores into fulfillment centers to really enable the expansion of our new commerce business into those cities. Now as we beef up supply chain infrastructure across the country, we've realized that in some of these cities, we've had locations which are large, which could really serve as fulfillment centers. And what we've done is to transition stores, which were revenue-generating, into fulfillment centers, which will then serve new commerce operations, and that will enable us to rapidly expand to those cities in the current quarter. And the third is, of course, challenging operating conditions, which have had a bearing on the revenues, the sporadic COVID restrictions, but more importantly, the local conditions that came in. Overall, I'll leave you with a message to saying on the continuing business, the part of the business, which wasn't impacted by these one-offs or these exceptionals, the business with them continues to remain very healthy. From a profit standpoint, it's been a record quarter on profit, both EBITDA and net profit. That's been led by the near doubling of fashion and lifestyle as fashion and lifestyle has come back, and I did mention that this is by far the most profitable part of our business. So it's very reassuring to see this business come back. And therefore, it has contributed to profit delivery. The continued benefit of cost management initiatives, it's something that we had embarked upon. If you recall, I've spoken about it in previous quarters as well. This is when COVID struck, we've embarked on a fairly broad-based cost management program and the benefits of those continue to reflect in our results. And we've received a boost from higher investment income. So after the fund raise, there is clearly capital which is surplus and which we will look to invest as we go forward. Those are being deployed at this point of time in investments. And we've received a boost from the income that we've earned on those investments. So EBITDA in a sense, crosses a new milestone as you will make up from the graph on the right of INR 3,000 crores. So here are the financial headlines, therefore. So segment gross revenue for retail came in at 37,845. And I'm going to talk quarter-on-quarter comparison because we're still coming off a period of recovery. So that was 8% lower, but fundamentally for the reasons that I just mentioned, transfer out of Petro retail, decision to migrate and transition our market stores into fulfillment centers. And thirdly, I would say, COVID-related restrictions and local disturbances. Our total EBITDA at 3,087 was up 54% over the previous quarter. And profit after tax at 1,830 is up 88% over previous quarter. Now the total EBITDA, and I just mentioned this on the previous chart, but the total EBITDA was boosted by investment income of INR 775 crores. And if I had to exclude this, the underlying operating margin would be at 7%, which is still way higher than what it was last quarter and same time last year. So in many ways, reflecting a recovery of margin despite all the operating challenges. Our thrust and priority on expansion continues unabated. Our store count is now in excess of 12,000. We've opened 327 stores this quarter. YTD, we've opened 630. Our digital commerce business, something that has gained increasing momentum after the onset of COVID continues to grow scale. It's up 12x year-on-year. So if you look at the same time last year versus now, our digital commerce scale is 12x more than what it was. JioMart and Ajio continue to scale new highs. We have new records on whether it's traffic, whether it's customers, whether it's orders. We are extending our new commerce business, now over 1 million partners on board with us. And clearly, we trusted partners and working on an inclusive growth model with them. And clearly, as we build supply chain infrastructure and we've done some of these actions on converting market stores to fulfillment centers, that will start to receive a [ flip ] in terms of onboarding and scale. And the most heartening piece is through this phase, one of the very important principles that Retail has always stood for in terms of its business model, is to really create employment. And through this period of time, ever since COVID struck, retail business has actually generated over -- or created over 51,000 jobs, as we stand. I think that's very heartening piece as you look at the host of all the other financial metrics. So coming to each of the businesses. I think on consumer electronics, a few comments. When you look at our stores in consumer electronics, and I'm not saying excluding the Jio devices because I will make a comment on the Jio devices specifically. But excluding that, these stores have sustained their growth momentum. They are up double-digit quarter-on-quarter. We've had a very strong test of season performance, clearly, with growth ahead of the market as reported independently. Tier 2 and 3 cities and towns are leading the way. And this is a thematic that is playing out across the breadth of our business, whether it's grocery, electronics, fashion and lifestyle, smaller towns and cities have clearly led the way in terms of both recovery and growth. A lot of things which have worked for this business in the past, which has allowed us to really deliver very competitive performance, whether it's really campaigns around affordability, product launches, working in close partnership with vendors, offers, all of those have continued to remain key factors and drivers of growth of our performance in this business. Across categories, laptops, tablets, televisions, high-end televisions and small appliances have really led the performance. Omnichannel capabilities, which is really the build-out of reliancedigital.in are further augmented. Across 1,300 cities that we are present, 95% of the orders that were delivered from stores was delivered in under 6,000. Let me remind you, and I've said this earlier, that this is a very unique capability that we have. It's a unique proposition that we have that we think that, at this point of time, we are able to deliver the fastest. So really 95% of that -- of those orders were delivered to customers in under 6 hours. And yes, we've had a drag from the Jio devices that's continued into this quarter as well, but there are clearly plans to float, and a lot of those plans have now moved into the next quarter. So when we come back and talk to you the next quarter, you will have seen this being put behind in progress on this front as well. On fashion and lifestyle, and this has been the star performer for the quarter. Clearly, apparel and footwear revenues have staged a strong bounce back. Higher conversions and build values have offset the lower footfalls. Footfalls, as I mentioned to you, was about 1/3 lower than they were same time last year. But clearly, a lot of the work that we have done on driving activation in-store, the assortment that we've created has really led to higher conversions and higher ticket sizes. And that's really helped drive that growth. So I think the big piece for us now is that as restrictions start to ebb and more traffic comes back to stores, this all goes quite well. Impactful regional and event activation has led to a good festive season performance for us. Again, the growth led by smaller Jio towns and I think that's where trends more town as a format is doing really well and leading a lot of the performance in the Fashion & Apparel space. Continued focus on building digital commerce. Ajio orders are now 5x up they were same time last year. And we are seeing a step-up across all customer and operating metrics, traffic, monthly active users, orders, business, catalog size, pretty much everything really growing exponentially on this one. And what we're now doing is to extend digital commerce for fashion and lifestyle onto JioMart as well. So it's well-established in all Ajio, and we're now taking it onto JioMart well. We've already launched it on JioMart. It's now live across 3,000-plus pin codes, but over 10,000 options that are already listed. And this is poised for expansion across cities in the course of the current quarter. Our partnerships, which is very integral part of the business model and the frontier of growth that Reliance Retail is looking at continues to grow. We are now in the fashion and apparel space in 1,900 cities, this is up from where it was last quarter. We have 2x more merchants and 3x more on the catalog to offer. And this is again poised for rapid expansion in the quarters ahead as markets start to open out and come back. In our Jio business, we've had a very good quarter, very high double-digit growth, both on a year-on-year basis and almost a sequential doubling of this business. Our portfolio is strengthened. And I think this is where -- the design capability that we've been investing on over a period of time is really yielding very good benefits. Portfolio is strengthened, and we've launched a host of collections, which are very well received, whether it was Utakala, which is a themed collection-based on the heritage of Orissa. A collection called Sparkles for silver, Nitara for children, and Bella, which is the lightweight jewelry. So clearly, the portfolio being widened over here and design capability being leveraged. Strong festive season performance and diamond contribution, which had come off as the onset of COVID had come through, is now building back. It's not where it used to be pre-COVID, but clearly inching back to it. So directionally improving. And on our luxury and premium brands portfolio, as malls have opened out, this business is 2x of what it was last quarter. And that all goes well. And I think as traffic starts to come back into malls, the business is well positioned. Digital commerce revenues are up 3x from where it was last year. And we have many more mono-brand sites to really complete the entire digital commerce capability for this business. What this business has also done is because stores were shut, it had looked at alternative ways to really be able to engage customers and 2 things which it specifically did was to create impactful events. And many of you would have already experienced the luxury shopping festival or [ Rainbow Express ], which are really events which have been very engaging. And the other thing which the business did was to really pioneer this whole concept called distance selling where store associates and store teams really engaged with customers virtually to really be able to engage with them and drive commerce. And that's now 20% of the business. It didn't exist pre-COVID, and that's a new capability for this business. On grocery, I'd call it continuing business because there have been pockets of this business, which have been impacted by the decisions that we took in by the local issues that we were confronted with. But the continuing business have sustained its healthy double-digit growth momentum, right? But the headlines revenues were obviously impacted for the reasons I just mentioned. Higher bill values have continued to make up for lower footfalls, JioMart has continued to grow scale, more traffic, more active users, more orders. And I can tell you that this quarter over last quarter business is up 50%. So 1.5x over last quarter. And so JioMart continues to grow very rapidly and exponentially. Robust growth during the festive season, another good season for this business. We continue to leverage brand partnerships and a whole host of activities that we work very closely with the brand partners. We are strengthening our own brand portfolio, looking at them as brands and Snactac, Goodlife and Desi Kitchen and some of those brands where we've extended the portfolio in the course of this quarter. And our Kirana partnerships now have been extended to 23 cities with 2x more. And growing adoption of the proposition that we are putting out in working [indiscernible] as trusted partners. And now that we are building out supply chain and we have some level of readiness available with the transition of the market stores. This is poised to expand across cities in the course of the current quarter. Next one. Okay. So before I -- by end of and give you a sense of what lies ahead for the retail business. I thought I'd just take a minute to really talk to you about this whole inclusive approach to retailing that we're taking. This is very core to the operating model of Retail. And what are we seeking to do as a retail business. We're going a step backwards. And we're saying, you know what, we will go ahead and go back to really invest in design and development. We will start with that leg of the value chain, build design expertise, build brands, leverage customer insights. And then work progressively with a whole host of producers, SME's local vendors, manufacturers, regional and national brands and really play a leading role in developing India suppliers ecosystem. Alongside investing significantly in building supply chain infrastructure, which has the widest reach, state-of-the-art, a very efficient last mile, which is clearly a mainstream an important driver of customer satisfaction as digital commerce or digitally-enabled businesses grow with the finest technology enablement to really power that supply chain network. So that's what we are really investing in to really then as a route to working with millions of merchants to benefit a whole host of customers and consumers, right? And the route to doing that is JioMart. So JioMart essentially is looking to really leverage all that we are doing between design development, building the vendor ecosystem and supply chain infrastructure to really enable millions of merchants and benefit customers from all that we are doing. So that, in a sense, is at the very core of the approach that we are taking to build out the retail business. And that therefore brings me to [indiscernible], looking ahead and keeping with that intent, what are we looking to do? We're looking to step up the pace of new store expansion. And this is clearly a large part of it will be in the grocery space. But as much about creating the Smart Point network because the Smart Point network also serves the purpose of really last mile fulfillment for our new commerce business. Building season readiness, it's a big quarter for seasons and events and building season readiness for upcoming events. Accelerating digital commerce, expanding the category play on JioMart specifically. There's so much more in the works. You heard me say, fashion and lifestyle already on board. We're looking to extend it across 2 cities. We're looking to bring electronics on and expand that across cities. That's currently undergoing test. And then in the grocery side of it, we've clearly got work happening on building out some more models and some more offerings and extending the assortment. So JioMart will continue to see increasing action in days ahead. Developing the vendor ecosystem and executing supply chain infrastructure expansion because this is just so core and such an enabler to being able to deliver all that we've just spoken about. And growing new commerce partnerships across the businesses and across geographies. So really, in many ways, the Retail business has this whole funnel of initiatives, which are in progress. To really be able to fuel expansion and really deliver on our plans going forward. With that, let me hand over the session to Sanjay for the next piece. Thank you.

[Sanjay Roy]

Thanks, Dinesh. So let me give you an overview of the quarter gone by and what we expect in the upcoming quarters and years. So quickly, in terms of the production, it's been pretty much flat. The positive news is that the -- our cluster production commenced in December 18. And the production has ramped up as per expectations. We are at about 4.5 MMSCMD currently. And we're expecting getting the peak production later this year, which is about 12.9 MMSCMD. In terms of CBMs, the current juncture, we still remain quite flat, but what we are looking at is in capital-efficient ways of augmenting the production. U.S. shale, yes, the production has dipped and there good reasons for that. It's essentially the weak environment and in terms of pricing. And therefore, we [indiscernible] calibrate our approach to future -- further investments. But overall, if you look at production, it's being flat, we obviously expect that to now go up the upward trend will begin with the KG D6 production coming onstream with the cost of the fields. And the feature fields are poised to come on stream in the subsequent years. In terms of price realization, as we can see, there was a sell back into the COVID and then there's been some amount of demand recovery. Fortunately, in India, we are seeing the demand recover to -- has already recovered, I think an extent trend upwards when compared to the COVID levels. And in terms of [indiscernible], we've seeing a higher price realization, we continue to expect to have that. And US shale, yes, higher, but lower than what it was in 2019. Okay. Next slide, please. Thank you. So what do we look forward to going forward? Yes, the start of production in KG D6 does held a new journey for the gas business in Reliance and for India. We do clearly believe that the gas business is poised to grow by 2.5x to 3x in -- over the next 10 years. And that bodes well in terms of the pricing outlook. In terms of production, as you're aware, the [ cluster fields ] have been commissioned, are expecting 2 more fields to come on stream, which is the Satellite Cluster and MJ Fields and combined production is expected to peak out at about 30 million, 1 bcfe per day, which is a significant proportion, about 25% of India's current production and will need about 15% of India's demand projections. So all in all, the big advantage we have right now in terms of the East Coast is that we have a world-class and quality infrastructure. And in terms of exploration activities, we are looking at opportunities in the [indiscernible] areas, the catchment areas. And in case of success, we can bring it onstream in the most capital-efficient manner. So that's one of the priorities that we are also looking at in the next 12 to 18 months: exploration upside and [ resource operation ]. Next slide, please. I think there's a lag or -- yes. Thank you. So in terms of the R Cluster, so I'd like to say that we've had a very safe and reliable start-up. This is Asia's deepest gas field with the water depth of [indiscernible] 2,000 meters. So that's a technology milestone [indiscernible] in the industry. And in terms of India, it is India's first ultra deepwater gas production project. So production is underway. Ramp-up is underway, and things are in line with our expectations. So that's a positive. And we believe that sometime towards the second half of this year, we shall be able to achieve the peak production. In itself is like a 10% boost to -- from the current domestic production. In terms of sales, as you are aware, 5 million sand cubic meters of gas have been sold in 2019. And the balance is 7.5 to 8 million sand cubic meters, we intend to undertake a next round of bidding, which should happen in the few weeks time. Next slide, please. Thank you. So just to give you an update on the other 2 projects, the Satellite Cluster. So this is very much on track. The wells are drilled and completed. And we are in the final stages, which is the installation campaign, which is currently underway. And then once all the connections happen, then we are ready to produce and export the gas. So we expect this to all come together by the middle of this year. So that will be around 6 million to 7 million sand cubic meters besides the R Cluster. And also, we have the KG D6 MJ Field, which is a gas condensated field. So this is -- really has been underway since last year, and it's been on track. And even as the wells get drilled and completed, we are having the FPSO fabrication and subsea production system fabrication going on in parallel. So all of this should come together in the fourth quarter of FY '21. And that together should bring new production level to about 30 MMSCMD by the calendar year '23. That's what we like. And like I mentioned, KG UDW1, we have initiated the exploration campaign over there. So once we have the seismic, we'll look at potentially drilling in the next 12 to 18 months. That's the overall update on the oil and gas business. Over to you, Srikanth. Thank you.

[Srikanth Venkatachari, Joint Chief Financial Officer]

Yes. Thanks, Sanjay. So as you saw in the financial slides, we have now combined refining and petrochemicals into an integrated O2C segment. So for the next 10 minutes, I will describe the rationale and also highlight some of the salient aspects of the combined O2C business. More specifically, I want to talk about our highly integrated configuration, the manufacturing facilities, the diversified product portfolio that we have, the logistics infrastructure that helps movement of both feedstock and products, our market presence and opportunities. So while in one sense, we will benefit even more with the O2C segment reorganization, in another sense, we are also formalizing and already integrated business. So after that, then the next 10 minutes after that, quickly tap up the Q3 O2C, both operating environment and the financial performance. So starting with the O2C business segment. As you know, now countries are now aligned on the need for a strong global action on climate change. And this, we believe, provides us the right opportunity to accelerate our new energy and materials business, which is based on clean and green development. We believe that the reorganizing, the refining and petchem as O2C, it reflects this new strategy as well as the management metrics and facilitates more holistic and agile decision-making. It allows us to pursue opportunities for growth with the strategy partnership. It allows us to drive the move towards further downstream and getting closer to the customer and provide both provides a sustainable and affordable energy and material solution to meet India's growing needs. Yes. So go to the next slide. Yes. So when you look at this, we pioneered vertical integration and really, in some sense, consider oil to chemical concept well ahead of the industry. This has actually provided us -- given us feedstock security, it has provided us with flexibility. It has definitely reduced our volatility in earnings and has also enabled the margin capture at every level. So when you look at Jamnagar super site, we know that it is the world's largest and most integrated O2C complex. It's got an integrated C2 complex with the largest off-gas cracker and downstream polyethylene as well as MEG plants. Also, as you know, the PX facility is the largest single in a facility in the world. So cracker, for example, the cracker cost, we will be in the first quartile only because of our deep integration. We also have 9 domestic and 3 international downstream facilities. 4 of them, Hazira, Dahej, Nagothane and Vadodara are cracker-integrated sites. Which are also, in turn, integrated with downstream chemicals and polyester, polymer and elastomers. And the -- for retail, as you know, the -- we have a virtual pipeline in the sense that we have 6 VLECs that move within from surplus U.S. markets. And when it lands in India, there is a liquid pipeline carrying ethane to Dahej, Hazira and Nagothane. Yes. Move to the next slide. Okay. While this does seem like a busy slide, it captures most accurately the extent of the integrated configuration that has helped us to maximize our profits. In Jamnagar, as you can see, apart from producing transportation fuel, it also provides a variety of feedstocks that form part of end products, such as PE and PP as well as elastomers that are actually manufactured in Jamnagar itself. That we also -- it also uses petcoke in the gasification complex to producing gas as a source of energy and also puts to use high-value hydrogen back into the refinery. In addition, Jamnagar supplies PX and naphtha and MEG to the other integrated sites in Hazira, Patalganga, Vadodara and Dahej, and which is used for manufacturing petrochemicals. These integrated units in addition, [ gets eaten ] from the U.S. I talked about the floating pipeline as a source of feedstock. And again, these integrated units, in turn, also provide free stocks such as PTA, MEG to the end polyester sites, including [ Silvassa ], Barabanki, Hoshiarpur. So this schematic, in a way, highlights the very deep and unique integration across sites. Onto the next slide, please. Just a few quick words on the manufacturing facility. As you know, the plants that we built recently, they are state-of-the-art future-proof engineering standards to what we have used. The age, most of the assets are less than 20 years, providing a long runway. You know that we are the second largest producer of PX, fourth largest of PTA and sixth largest in as far as PP and MEG are concerned and also the world's largest integrated producer. We have the lowest -- we produce the building blocks that is ethylene, propylene, aromatics. We are the lowest cost there. Also, we have deployed world-class catalysts and product technologies across facilities. And coupled with the fact that we do have flexibility to process a variety of crude, we do condensate naphtha, off-gases, ethane, propane. So there is significant flexibility to use feedstocks. And coupled with the multi-model infrastructure support, ensures that we have the best-in-class configuration to maximize on [ purpose ] chemical production. Also, we have consistently maintained high operating rates, and we will be in the top quartile performance in terms of cost in safety and operational activity. On the next slide. So this schematic talks about the portfolio that we have, which cater to growing consumption market. So when you look at it, there is a margin -- first, there is a margin capture across all the conversion chains. Then there is a reduced exposure to individual product cyclicality. And then we are exposed to the high-growth domestic market as an opportunity. So when you look at fuels, gasoline, gas oil, ATF, they're all transportation fuels. When you look at polymers like PE, PP, PVC, they go into construction, consumer goods, agriculture, automobile, elastomers goes on tires on automobiles. And aromatics and fiber intermediaries goes into polyester and textiles. And then, of course, polyester going into textile apparels and beverages. We believe that we would be the only company globally with this level of integration from oil to polymers, chemicals, polyesters and elastomers. And then the next slide. A quick word on the logistics. We have 6 SPMs as a dedicated port jetties and multimodal product evacuation infrastructure. We have tankages at major hubs. We have pan-India warehouses to give just-in-time the smallest of customers, which is a big asset for us. We have 5x the distribution footprint of our nearest competitor in India. And we have strong customers. We sell 11,000-plus customers for chemicals and materials through 16 regional offices and 61 warehouses. And in our retail fuel, we are talking about serving 1,300 retail customers per day. And we have digitized and automated supply chain. So there is zero-touch auto processing. So what logistics infrastructure does is for us, it is a key enabler to reduce feedstock costs as well as improve our product realization. Moving to the performance indicators, what we believe forward to see our key performance drivers. So starting with operational excellence. So that is about high utilization levels. Feedstock sourcing is more specifically, you're talking about flexibility to process challenging crude grades and also multi-feed cracker operations. Energy-efficient operations, a very important driver now with -- we have increased flexibility with the gasification complex, our presence across multiple product value chains, starting from polymer elastomers, polyester and transportation fuel. And each one, we are either a top global producer or it's a part of a large integrated chain. Or we are able to produce the kind of product and specs that is required, which is, again, in transport fuels is integrated well with retail outlets. Product placement mix driver, for fuels it is the export market for polymer and polyester is the domestic. But what is important -- as important is the fact that we were able to switch this as we saw in March and April when what was -- in the case of the petrochemical products, which is going into the domestic market, we were able to shift it, are able to export it. So the ability to swing that has also been a key performance -- it will remain a key performance driver. And finally, the -- as we get closer to customers, having the customer-centric applications and solutions mindset is one of the key performance drivers. And therefore, the -- our overall inherent advantages, the operating excellence and the rich portfolio for us makes RIL a very leading OTC global player. On the market presence side, as you know, we have a 35% share in polyester and polymers. And these cater to induce application that, if you recall, I talked about on automobiles and consumer durables, FMCG, packaging, agri, infra, health and hygiene. I mentioned all these names because, as you know, these are the opportunities for growth. And when you look at chemicals, interestingly, chemical inputs now are among the top 3 items in our trade by value. So in that sense, it provides us with a multiyear growth opportunity and more it's a high potential for buildings India's self-reliance. Also, our capability to produce niche and specialty chemicals of polymers for diverse end users. And again, the proximity to demand centers and logistics, this give us sustainable cost advantage or competition. And the next slide. So when you bring this together as an integrated and diversified OTC players, scale, size, scale, flexibility, integration. I mean, makes us very cost-competitive and also a reliable production plans globally, our customer connect and a wide distribution network and more importantly, as we strategically move towards solutions, leads to -- it helps us really capture the India growth story because as you move from a 3 trillion, 5 trillion or a 10 trillion economy and where demand growth for these chemicals and materials are -- will continue to grow very sharply. And then you also juxtapose that against the fact that we are among the lowest in the world in terms of consumption per capita. We, therefore, believe that this O2C business will play a major role in growing as well as enabling India's growth story. So in the next slide, please. Just quickly to the operating environment and financial performance. Yes, the key macro trends, I mean, you have been tracking at global economic activity reviving and clearly, the vaccine visibility has helped. This quarter, demand for oil did grow by 1.5 million barrels per day Q-o-Q. We also saw a strengthening in prices. [indiscernible] light heavy differential, negative for the first time in 2 decades because the Q-on-Q fall in OSB of heavy crude was less compared to light. Overall mobility indicators was in line into Jan '20 is well -- Asia -- China is 113, China has INR 103 crores strong improvement there. More for us, if you see demand for polymer is up 8% sequentially, polyester up 38%. So now this takes the demand environment to above pre-COVID levels. Oil demand is also actually up 19%. And this is almost 99% of pre-COVID levels. In products like gasoline diesel, it's well above 102. So this economic activity revival be -- thus is reflected in a way in the commodity market. Moving to specifically on polymers, you can see that 8% I talked about, specifically BP has been strong at 12%. Global operating cracker operating rates continue to be high at 86 improvement over 84 in the previous quarter. And as I mentioned, the demand for polymer coming from the health and hygiene sector and the irrigation and construction sector where demand grew by 15%. When you look at the margins, very sharp improvement there. And when you look at specifically, PP, LDPE or naphtha, these are actually 5 and 10-year highs. And more so, PVC, especially has gone about 10-year level. So it's a very strong environment. Of course, it was also benefited by the fact that there has been some supply constraint on, for example, on container, which also helped to boost the margins. But still, I would say the driver is coming from very strong sustained recovery in demand for all the key consumption markets. On polyester side, this is a strong story, up 38%. As I mentioned, demand above pre-COVID levels on the back of festival season and economy and the fact that the economy is growing. Chain margins, you can see INR 410 crores to INR 450 crores, essentially up 10% on the back of firm operating rates and declining inventories. And you can see the downstream exit rates for December, where operating rates in spinning is at 95%, knitting at 74%, weaving at 76% and processing 79%. Also specific margins for PTY, FDY have been strong. Next slide? On transportation fuels, there is a slight improvement in demand in gas, oil globally to 27.6 million barrels per day. But overall, gas-oil market remained weak because of oversupply coming on account of refinery rates in Asia. Inventory, as you can see, see in the box, 195 there, which is 1 million barrels, which is -- continues to be high and when you compare it to 3Q FY '20. Also gas pool continues to be well supplied because of yield shifts on lower jet fuel demand. And so that is pressurizing gas oil a bit. On ATF, you can see that the global mobility tracker for air travel is about 54%. Yes, it is above 45%, but it is still a way to go in terms of recovery there. You do see a sharp increase in cracks from minus 0.7 to 2.4 sequentially. And this is also on the back of stocking by South Korea and Japan on account of winter. Overall, display cracks we believe are showing early signs of improvement with increased mobility. And finally, on transportation fuels, this gasoline demand was lower by 0.5 million barrels. This, I would say, is more seasonal with -- in winter, seasonal because of winter and as well as the lockdowns in U.S. and Europe. There has been a slight marginal improvement in cracks and this will continue to be constrained by high inventories and regional exports from China. Next slide. So here, you can see that our throughput for this quarter was at 18.2 million tons. This is up 8.3% Q-on-Q. And as you know, last time, we had a planned CDU turnaround in the second quarter. We are providing now a production meant for sale, which means that across transportation fuels, polymer, fiber intermediaries, polyester and chemicals, we are talking about the production meant for sales, that means the internal consumption of feedstock is not part of this number. So it's easy for people to understand what has been meant for sale. That is at about 16.2 million tons. Again, an increase of 14.9 in the previous quarter. Our utilization rates have been high cracker utilization at 96. You will recall that the global average is about close of 85. So our production -- jet production also increased in line with some of the improved regrades. We rebalanced fuel mix to include more liquids due to higher LNG cost and paraxylene-orthoxylene production was also optimized based on economics. So we continue to maintain our market share with both the optimization of product mix as well as feedstock. So now bringing it together in terms of overall numbers, you can see revenues at INR 83,800 crores, 10% higher on a quarter-on-quarter basis; EBITDA, INR 9,756 crores, which is again 10.3%; margin for 3Q, 2Q has been 11.6% flat. And just to summarize, we talked about all the reasons for that, the growth is really about demand growth. There are high utilization rates and the fact that polyester chain and polymer margins have strengthened a lot, which kind of offsets some of the weakness we saw in transportation fuel. And we also benefited from the feedstock flexibility, especially when we did shift our heavy crude to Latin America and also some of our naphtha cracking enhanced because of the improved product economics. So in firm downstream to margins and demand recovery aided our EBITDA growth. And finally, going into our near-term outlook for -- on macro, we think 2021 should be 96.6 higher than this year, for sure, but slightly below what we saw in '19. But this increase in itself, we believe, will bring a rebound in fuels and downstream products in India. Margin trends. Fuel margins, we do see a steady improvement with this demand revival. And more importantly, the inventory drawdown. And on specific products like PVC and PP, the outlook remains very constructive, favorable demand supply. Polyester chain margins are expected to remain firm on improving end markets, and we saw some of the utilization in the previous slides. But from a more broader, sustainable growth, we believe that domestic independent, the domestic market and our strong competition -- competitive position across products and the fact and that we are focusing much more on customer-centric offerings of niche polymer products will help sustain growth for us. The near-term challenges are there, which can come from product stock and supply from China. And if there are any increased lockdowns in U.S. and Europe. Next. So just concluding comments. Our part to energy transition, as we saw some of our Western class O2C assets have now been carved into Reliance O2C Limited. And but the focus will be on maximization of profitability from further downstream chemicals and materials to meet India's demand. It will involve reducing our transportation fuel footprint in a phased manner. And the downstream integration, we expect it to be asset-light through alliances and partnerships. And RIL will incubate new energy and new materials platform. Focus will be on clean and green affordable energy as well as sustainable materials of the future. And this value will be created, we believe through technology and innovation, and we do target net carbon zero by 2035. So if I were to bring together all our growth engines in one slide, which we believe will help us create value. Starting with Reliance Jio, growth will come from subscriber ramp-up. It will come from enterprise solutions. It will come from narrowband IoT and scaling up of our digital platform. In retail, we see growth coming from JioMart which will create value for the entire ecosystem because of its partnership with small merchants, kiranas and farmers. In O2C, the value comes from going or maximizing further downstream, reducing our transportation fuel and focus on clean and green energy platforms. As Sanjay talked about, we'll ramp up domestic oil and gas production and increasing going forward synergize our financial services with consumer platforms. And RIL will continue its focus on identifying, nurturing new growth platforms. So we do have multiple engines of growth, which are firing. And the focus clearly is on focus on consumers and technology. This really brings me to the end of the presentation and thank you so much for being -- getting on the call and handing it back to Srini.

[B. Srinivasan]

Thank you, Srikanth. As always, please, if you have any queries, please do send us an e-mail, and we'll be happy to answer them. Thank you very much for staying up quite late and listening patiently to all our presentations. Thank you, and good night.