Reliance Industrial Infrastructure reports 12% decline in Q2 FY 24-25 income

Reliance Industrial Infrastructure Limited (RIIL) has announced its financial results for the quarter ending September 30, 2024 (Q2 FY 24-25), reporting a dip in income compared to the previous year. The company’s consolidated income stood at ₹ 1,836.57 lakh, down 12% from ₹ 2,084.72 lakh in Q2 of the fiscal year 2023-24. The reduction in total income was attributed to lower utilisation of infrastructure assets.

In terms of profit, RIIL’s consolidated net profit slightly decreased by 2%, totalling ₹ 312.23 lakh compared to ₹ 317.66 lakh in the same quarter last year. However, the company saw a marginal improvement over the previous quarter of the current fiscal year, with net profit rising by 8% from ₹ 289.94 lakh in Q1 FY 24-25. Despite this improvement, the year-on-year drop signals challenges in maintaining previous performance levels.

Standalone Performance Reflects Decline

The standalone financial performance of Reliance Industrial Infrastructure for the quarter presented similar trends. Total income for Q2 FY 24-25 was ₹ 1,836.57 lakh, a decrease of 12% compared to ₹ 2,084.72 lakh in Q2 FY 23-24. The standalone net profit for the quarter was ₹ 243.43 lakh, a slight reduction from ₹ 247.56 lakh recorded in the same period last year.

The infrastructure service provider primarily focuses on the transportation of petroleum products and raw water through pipelines, along with other support services, predominantly to Reliance Industries Limited. The company indicated that there are currently no plans for expansion, reflecting a focus on maintaining operational stability amid fluctuating income levels.

Expert Analysis: Challenges in Asset Utilisation

According to financial experts, the decline in RIIL’s income can be attributed to reduced utilisation of its infrastructure assets, which has directly impacted revenues. Analysts note that the decrease in demand for transportation services has likely influenced these numbers, and this situation might persist until there is a substantial uptick in industrial activity and infrastructure projects across the region.

An industry analyst pointed out that RIIL’s close relationship with Reliance Industries Limited has provided a stable revenue base, but the dependency also exposes the company to risks associated with fluctuations in demand from its primary client. Experts suggest that a strategic diversification could help mitigate these risks, though no such plans are currently on the horizon for RIIL.

The earnings per share (EPS) for the quarter on a consolidated basis was ₹ 2.07, showing a small decline from ₹ 2.10 in Q2 FY 23-24. On a standalone basis, EPS stood at ₹ 1.61, as opposed to ₹ 1.64 last year, indicating a minor dip in profitability per share.

Market Reaction and Stock Analysis

Following the announcement of financial results, RIIL’s stock showed moderate volatility on the market. Investors appeared cautious, with sentiment reflecting concerns over the consistent decline in asset utilisation and profit margins. Analysts believe the company’s continued focus on providing infrastructure support services without a clear expansion strategy may limit growth prospects.

As of October 13, 2024, RIIL’s share price witnessed a slight decrease of approximately 1.5% on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), closing at ₹ 433.40 per share. Market experts have suggested that while the company’s fundamentals remain stable, the absence of growth initiatives might keep the stock under pressure in the near term.

The trading symbol for Reliance Industrial Infrastructure on the BSE is ‘523445,’ and on the NSE, it is listed under the symbol ‘RIIL’. The company remains an integral part of the infrastructure sector, providing essential services despite current operational challenges.

Outlook

Looking forward, RIIL’s focus will remain on maintaining stability within its existing operations. However, analysts argue that unless Reliance Industrial Infrastructure diversifies its portfolio or invests in new infrastructure projects, it might find it challenging to improve its financial metrics significantly. Investors will likely be watching for any signs of strategic shifts or expansion initiatives that could signal renewed growth potential.