Reliance Industries Ltd

NSE:RELIANCE

Earnings Call Transcript 2023-Q2

[Srikanth Venkatachari, executive]

I welcome you to the second quarter FY '23 financial results presentation. Like always, let me start out with the consolidated financials and then hand it over Kiran and Anshuman for the Digital Services part of it and then to Gaurav for Reliance Retail, for -- to Sanjay for the E&P upstream business and then I will take it back to complete the O2C as well as the final set of comments.

So starting with the results for this quarter. So EBITDA at close to INR 35,000 crores, up 14% led by consumer businesses and upstream. Net profit at INR 15,512 crores was marginally up on a year-on-year basis. Earnings were impacted by lower O2C contribution. Of course, we did see the impact more on a quarter-on-quarter basis. I think O2C was impacted really by product volatility in product margins, the fact that demand was subdued and the introduction of the special additional excise duty.

The retail consumer parts of the business has done -- did exceptionally well with robust retail revenues and EBITDA also being strong, and we saw growth across consumption baskets, we saw increased rebound in footfalls and also the benefiting from the strengthening of the digital channels.

On the digital services side, customers -- the number of customers were 428 million and strong growth in ARPU on a year-on-year basis. And of course, Oil and Gas benefiting from sustained production and the increase in the ceiling price for domestic gas.

So overall, diversified earnings streams did cushion the volatility of the energy markets.

So when you look at each of the segments, starting with revenue, retail INR 65,000 crores of revenue, EBITDA of INR 4,414 crores. So growth rates, revenue up 43%, EBITDA up 51%. Store count, well above 16,600 to be precise. We added 795 stores, and this is over and above 793 stores that we had added in the previous quarter. The number of transactions up 45%. Record footfalls, 180 million footfalls. So this is 23% above pre-COVID. And what is very heartening is the launch of JioMart on WhatsApp and the important point there is 37% of orders were from customers who are new to JioMart.

Moving to Digital Services side, close to INR 30,000 crores of revenue, EBITDA at INR 12,300 crores. So revenue is up 21%, EBITDA up 29%. ARPU at INR 177 with the improving subscriber mix. Strong growth, healthy growth in customers, we added 7.7 million subscribers in this quarter. And the engagement statistics as reflected in many parameters, including the fact that the consumption of data per capita crossed 22 GB per user.

On O2C side, revenue up 33%, EBITDA down 6% on a year-on-year basis. So strong middle distillate crack with tight supply in Europe, again, that demand coming from oil to gas switching. However, we did see weak polymer margins amid volatile feedstock prices. So we saw lower demand, we saw on the polymer side. Polyester was kind of stable, but earnings impacted because of high crude cost, the OSPs were significantly higher, freight costs were higher, insurance costs were higher. Importantly, we did have the introduction of SAED on transportation fuel, that was worth about INR 4,030 crores as far as the EBITDA is concerned. And we also had lower volumes, so that is, of course, planned turnarounds that we had. Quarter-on-quarter EBITDA was impacted by 40% because of the sequential decline in margin as well as SAED.

Oil and Gas, a strong story, EBITDA up 3x of what it was, and we had realizations of $9.9 MMBtu. This is almost 2.75x what it was in the previous -- in the quarter last year. And production remained stable and it's contributing to 20% on gas production. And we are on track to commission the MJ field with -- Sanjay will talk about in his section.

Bringing this together in consolidated numbers. Year-on-year revenue was up 32%. Oil prices being high. Retail, strong growth. EBITDA led by Retail, by Digital Services, by Oil and Gas segment but there was subdued O2C contribution as we saw. Net profit also effectively flat on a year-on-year basis. We did see increase in finance costs on the back of all the Central Bank actions globally. Also, we did see increased depreciation on the back of an expanded asset base, the fact that higher network utilization as well as the upstream production, which results in higher depletion and depreciation. And therefore, when you see overall that really explains why the net profits were flat. And just to emphasize that SAED also is one of the contributors for why it was a flat net profit on a year-on-year basis.

So this is a bridge INR 30,000 crores in 2Q going all the way to INR 35,000 crores year-on-year. You can see that -- you can see the strong performance of Oil and Gas. You can see the strong performance of Retail and Digital Services. Lower by INR 752 crores essentially on O2C on the back of weaker polymers and aromatic margins, introduction of SAED and growth in Oil and Gas, we talked about. And on Retail and Digital Services, we, again, talked about those factors. All in all, 14% growth we saw. And on a Q-on-Q basis, the big impact on O2C side. And overall, some amount of competition coming from the other businesses, but we did see a strong fall on the O2C side.

This is the levels of gross debt and net debt. March was INR 34,815 crores and net debt now is INR 93,253 crores. Just to highlight that the first half FY '23 CapEx was completely funded by cash profit. So it is well funded debt. And this CapEx is really in -- is in line with what we have been talking about in terms of growth across all our sectors on O2C, on New Energy, on Jio as well as Retail. So this is all part of the planned strategy. But the point I was making is that it is completely funded by the cash profits.

The increase in debt that you are seeing is really attributed to higher working capital, given the significant dislocation in energy markets. [indiscernible] of the impact of translation of foreign currency liabilities, the rupee depreciation. So as you know, the debt has to be restated in today's rupee terms. And also to that while we bought the spectrum, it's spread over 20 years, the first installment has to be paid. So that is also contributing overall to the increase in debt.

So this is where I will now hand it over to Kiran and Anshuman to take us through Digital Services.

[Kiran Thomas, executive]

Thank you, Srikanth. We can go to the next slide. So another great quarter with very strong performance. If you look at all these metrics, which we report regularly, still #1 in AGR market share at 45%. In terms of the subscriber market share, 36% of the total market. 428 million customers, more than 28 billion gigabytes of data delivered in this quarter. Daily run rate of more than 13 billion minutes of voice. And as was alluded to earlier in the presentation, now exceeding 22 gigabytes of data consumption per user per month. And of course, on the big screen of proposition that we offer, which is our Jio set-top box, I think the engagement continues to grow, and now it has exceeded about 6 hours per day. Next slide, please.

Customer engagement continues to grow. And if you look at the chart, today, it is obviously 22 GB, but if you just compare it to like-on-like basis from 2 years back, these numbers are nearly doubled over this period. ARPU has also grown as a consequence and today, our ARPU of INR 177 on a like-to-like basis is an industry-leading performance. Of course, the 5G rollout, that is now underway, will substantially improve both consumption as well as the subscriber mix, and this is expected to improve both per capita usage as well as ARPU on a looking-forward basis.

Talking a bit about the 5G proposition that we are bringing to market, we believe it is quite differentiated from everybody else in the market. We call it the True 5G advantage, and there are effectively 4 components of what we count as a True 5G advantage. Number one is what we call the stand-alone architecture, which is the most cutting-edge architecture of 5G that is being deployed anywhere in the world. Number two is the unique spectrum holdings that we have to launch 5G services. Number three is a unique technical capability that we call Carrier Aggregation, which allows us to combine all of the spectrum holdings across the multiple bands that we have into a single unified data highway. And number four is the RICS tech partner ecosystem that we have built, which is enabling us to deliver solutions, which are quite unparalleled in the country. Next slide.

Now picking on each of these elements in turn. What is a standalone architecture? Just to mention it, conceptually, it is a completely standalone version of 5G, which unlocks the full potential of 5G SA technology to contrast it with what everybody else in the market, other competitors in the market are looking to launch, which is called non-standalone, which still leverage us the 4G network in terms of the core signaling capabilities. So what does SA have over and above the NSA capability? Obviously, being a completely standalone 5G network, we are able to deliver absolute lowest latency -- end-to-end latency that 5G enables, which means that things like cloud gaming, augmented reality and a number of real-time enterprise use cases can only be supported on SA.

Of course, being a completely undiluted version of 5G, we get better speeds. And looking to enterprises advanced capabilities like network slicing, which is creating a virtual network dedicated to a certain enterprise or a segment is only possible with standalone architecture. And as we start rolling out the [indiscernible] being connected in large numbers, the 5G capability to deliver massive machine-to-machine type communication is also only possible with SA. And of course, SA delivers, being a pure 5G implementation, SA delivers superior power efficiency, and therefore, it's more green and sustainable as well.

Number two, we spoke about the unique 5G spectrum footprint. If you look at the 5G spectrum holdings across all the operators, we are -- today, if you look at our holdings, it is nearly equal to the combined holdings of the other 2 major players in the market. And more than the quantity itself in terms of the quality, we have the sub gigahertz spectrum in the 700-megahertz band. We have, what we call, the mid band, which is the sweet spots for 5G services in the 3.5-gigahertz band and obviously, millimeter wave, which is where we have phenomenal capacity for variety of use cases in the 26-gigahertz band. So this combination of holdings means that through the sub gigahertz and, obviously, the mid band, we get deep indoor coverage. And obviously, as we get into the millimeter wave, we have near fiber-like speeds that we can deliver over wireless spectrum.

Talking about Carrier Aggregation, this is a technology which allows us to combine all of these 3 spectrum bands and treat it, as you can see in the graphic to the right, you can treat it almost like a single unified data highway. And what that means is when it comes to uplink, which is where most of the constraints are from the low-power devices setting back to our network, we can leverage the 700-megahertz there because that gives you deep indoor coverage. And on the downlink, for example, we can now combine the mid band as well as the millimeter wave combination. So really mixing and matching the spectrum holdings for what they are good at and treating them as a single logical and virtual unified data highway is what Carrier Aggregation is all about. Next slide.

Talking about the deep partnerships, pretty much the who's who in this industry, everybody that matters is partner with Jio. If you take Qualcomm, they have deep intellectual property assets, and we are working very closely with them to create the next generation 5G infrastructure, especially focused on the millimeter wave and the sub gigahertz frequency bands. And since they have intellectual property that is used by a number of players in the fiber ecosystem, they are also a strong partner with us to really go and develop and shape that the ecosystem and make sure that we have the richest possible ecosystem in India.

Meta, who is now working on the next wave of immersive technologies. They are an investor and a strong partner working very closely with us to really use 5G to bring those next set of immersive experiences to India. Google, again, working very closely with them, especially on Google Cloud, to offer everything from private 5G stack that is basically taking the technology that we have developed and hosting it as a private stack for enterprises, again, they can do that on GCP today. And of course, a number of other 5G-enabled solutions, which are right on top of our network, again, a deep partnership with GCP to be able to bring some of those cloud native solutions. And Intel, another investor and a strong tech player globally. Using their technology and expertise to build the next-generation cloud and edge data centers, which will obviously be required to unlock the next wave of applications that take advantage of 5G. And from the network perspective, pretty much everybody, every leading vendor is today working with us. Nokia, Ericsson, Samsung, Cisco, just to name the most prominent of that.

So looking at the True 5G strategy, there is a strong story that we can tell for pretty much every segment. If you look at homes, really accelerating the rollout of near fiber-like broadband to homes and really looking at not just bringing broadband but also streaming television consumption. If you look forward, which is really what's happening globally, interactive television experiences really is the first wave of things that Indian homes can expect, thanks to True 5G, bringing that home broadband connectivity.

On the mobility side, obviously, accelerating that consumption that we saw, the near doubling of consumption on the mobile network over the last 2 years, we see that trend growing. And 5G is a core foundation to support that growth, and of course, bring in the next wave of high-quality customers on to Jio.

Small and medium businesses, there's an underserved segment pretty much like homes. Again, not just delivering broadband but also working with a number of ecosystem partners to deliver a cloud-native and Edge-enabled solutions for businesses. And of course, enterprises, again, using the power of True 5G to support a number of use cases, things like smart factories and so on, which is again using a combination of True 5G and Edge computing. So if you look at it, really transformative set of solutions and capabilities that we're delivering to pretty much every segment in India. Next slide, please.

And with that, I'll hand it over to Anshuman, who will talk about our operations and financial aspects.

[Anshuman Thakur, executive]

Thank you, Kiran. I'll cover the operational and financial results for the quarter now. We had a good, strong financial performance for the quarter in Jio Platforms Limited, consolidated revenues came in at INR 24,275 crores. That was a growth of 22.7% year-on-year. And the consolidated EBITDA came in at INR 12,011 crores, which is a higher growth, 29.2% year-on-year, really reflecting the operating leverage more than anything else. [ HUC ] impact has started -- there was an element of [ HUC ] impact in this quarter, but not the entire bit. The data traffic growth was very healthy during the quarter. We -- the total data carried on the network was 28.2 exabytes. That's another 22.6% growth year-on-year. Per capita data consumption at 22 GB per user.

The subscriber base at the end of the quarter was 427.6 million. ARPU increased to INR 177.2 really through increased usage and quality of subscriber base. And as Kiran mentioned, we are gearing up for our 5G rollout -- pan-India rollout by the end of next year. A lot of progress already being made on that front.

The operating metrics all look quite good. Customer base 427.6 million, where we have leadership, both in the customer -- subscriber market share and revenue market share. We are continuing to grow every quarter. ARPU came in at INR 177.2. The data traffic increased 23% year-on-year. And the per capita data usage is 22.2 GB and per capita voice consumption at 969. The voice consumption came -- reduced slightly from the previous quarter, which could be a combination of reasons, including people becoming more mobile post a COVID world and COVID era, and therefore, back in offices, et cetera. So that piece of consumption may have gone down and also the impact of OTT communication apps.

The key financials for RJIL, the Connectivity business, which continues to show very strong, healthy and consistent growth. This quarter, the operating revenues were at INR 22,521 crores and EBITDA at INR 11,601 crores. The EBITDA margin increased 51.5% for this quarter and EBITDA growth of 29% year-on-year, fairly healthy. And the consolidated JPL financials now, where the quarter -- operating revenues for the quarter was INR 24,275 crores, EBITDA at INR 12,000 crores and net profit at INR 4,729 crores. So all of these growing by anywhere between 22% to 23% year on -- on year-on-year basis.

With that, we come to the end of the operating and financial summary for this quarter for Jio. And I'm going to hand over to Gaurav for the update on the Retail business.

[Gaurav Jain, executive]

Thanks, Anshuman. Good evening to all of you. Let me start the presentation on Retail performance by spending a minute on the operating context. So the quarter has been quite normative for us as the impact of pandemic has been waning quarter-after-quarter progressively. And it can also be seen from the boost in footfall that we see against the pre-COVID period as I compare, [ 123% ] growth over the same period is a strong number for us. In absolute terms, it was a period for highest footfalls at 118 million customers who visited our stores across geographies. This was also where we saw growth across all town classes through -- across all the channels as well. So while stores also grew, we also saw continued growth in demand in the digital commerce channels. And when looking at the consumer side, the sentiment remains upbeat, the spends on discretionary category continues to grow that is also visible to us through the growth in all our discretionary categories as well. [indiscernible], we can move?

With that said, talking through the key highlights for the quarter, the business delivered all-time high revenues led by broad-based growth across the consumption baskets. It was a very well-rounded growth for our businesses. We also delivered highest EBITDA for this period. Operating leverage efficiencies also favorable mix really drove margin improvement. We continue to operate at scale. We registered over 221 customers now, which is a growth of 28% year-on-year. Transactions grew a healthy 45% year-on-year to cross 250 million transactions, that results to over 2.5 million transactions on a daily basis, which is a very, very large scale operations across geographies and formats. Our [indiscernible] store opening program continues. We opened 795 new stores during the period. But more notably, we added 9.2 million square foot of space, which is a 20% growth over last quarter and possibly one of the largest expansions of Retail space by any Retail around the world in a short period. We are the only in the first retailer in the country to be able to cross a milestone of 50 million square foot of Retail area.

The Digital and New Commerce businesses, they continue to drive strong performance. Daily orders were up 53% year-on-year and our merchant base continued to scale up and doubled over last year. We continued to also strengthen our capabilities through partnerships and acquisitions. In August, we unveiled the JioMart-WhatsApp integration initiative. We also made investments into Insight Cosmetics to further bolster our game into the beauty business.

Looking at some of the growth pillars for us. Business grew 43% year-on-year to touch, say, INR 64,920 crores against INR 45,426 crores last year. What was enabled by was growth in grocery and pharma, which doubled over the same period. We also saw strong growth coming from Consumer Electronics and Fashion Lifestyle businesses, which grew by over 40%. Digital and New Commerce both channels put together, they grew over 60% year-on-year and they also had a very steady contribution at 18% of the overall revenues for us.

While the revenue growth continues strong, our profit delivery was at its best. So EBITDA was at a new high of INR 4,404 crores against INR 2,913 crores last year, which is a 51% growth. EBITDA margins saw a 30 basis point improvement at 7.6%. EBITDA margin from operations was 130 basis point margin expansion year-on-year at 7.4%. And that was led by a very favorable mix of revenues across the consumption baskets and also operating leverage and efficiencies. In particular, EBITDA in grocery, fashion and lifestyle and consumers, all of these consumption baskets we saw doubling year-on-year. Our efforts in expansion are on track. We opened 795 stores during this period to end the total store count at 16,617 stores at the end of September. Notably, I said 9 million square foot of space added when we compare it to our previous periods, that's more than twice that we saw in the previous quarter and over 3x that we saw over last year. So while we continue to add more space through geographies for better touch points with our consumers, we also continue to strengthen our capabilities on the back-end supply chain side.

During this period, we added nearly 5.5 million square feet of warehousing and fulfillment space taking our total supply chain area to about 31.4 million square feet. This is also a quarter where we crossed over our total employee base to 4 lakh employees. We added 35,000 people on to the rolls, taking our total employee base to 4,14,000 across businesses.

Looking at the financial summary for the business. Gross revenue, 43% up at INR 64,920 crores. EBITDA from operations grew 76% to INR 4,286 crores. EBITDA margin saw 130 basis point growth at 7.4%. Total EBITDA, 51% up at INR 4,404 crores and profit after tax at INR 2,305 crores, which is a 36% growth. Also a very strong growth on a sequential basis [indiscernible].

Also looking closely on Consumer Electronic. It had a very strong quarter. Our stores delivered strong performance led by higher footfalls, conversion remains very steady with high average bill values. This is also a period where our ResQ, which is our aftersales and installation business, that business also registered its best-ever quarterly sales. 15th August period is also becoming increasingly a big shopping period, where customers look for major shoppings. And for Consumer Electronics, we saw that period to be our best-ever Independence Day sale period with 60% growth year-on-year. And some of the factors like instant discounts, affordability schemes, cross promotions, all of that added to more color for consumers to buy [indiscernible].

Reliance Retail formats, because we operate across cities, the [indiscernible] and countries, so increasingly, more and more national, international brands, they see Reliance to be a partner for launching and we have seen a large wide number of launches on new products. iPhone 14, OnePlus 10, Samsung Flip/Fold, HP Victus Laptop. And these are some of the launches that we've seen in this period, but I think from a broader perspective, there are a tremendous number of launches which are helping customers to just widen their choice space, and they continue to come and shop at our stores.

The period also saw a broad based growth across categories. Categories like phones, TVs, or washer, they grew 30% year-on-year. Our own brands business has doubled on a year-on-year basis. We also saw the merchant base through which we sell our products as well as licensed brands like Kelvinator, BPL, that merchant base grew 10% on a sequential basis. JioMart Digital, which is the enormous part of the business, that business also grew 25% on a quarter-on-quarter as well as merchant base continue to get ramped up, we added over 25% merchants on a sequential basis.

Looking to the Fashion and Lifestyle part of the business, apparel and footwear, which is largely driven by trends, trends extension, formats, trends footwear. So offline business really posted their best ever quarter. I think the entire festive shopping, change of season, EOSS, I think all of these factors really combined helped deliver a very strong double-digit like-for-like growth for our stores. We also launched multiple new formats in the mid-premium to mass categories. So Azorte, which is a tech-enabled format Centro which is a Fashion & Lifestyle department store format and Fashion Factory, which is a brand for less format, these 3 new formats are launched. So our focus on innovation and serving customers to what they are looking for, I think those categories really help us to launch new formats.

Our growth across categories like men's formals, women's western wear were strong as customers continue to refresh their wardrobe as normalization is set in. Also saw a big pickup in categories like sarees and Indian ethnic wear on the back of festive shopping.

On the AJIO side, AJIO continues to grow strength to strength. Every quarter has been a further growth. So this quarter also, it had its best ever quarter performance. All the metrics had a very healthy growth. The catalog continues to be a very, very strong reason for customers to keep coming back and see that to be a destination for their choice of fashion. We now operate over 1 million options on the site. We also added about 85 new brand launches this quarter alone.

On the New Commerce side, where we work with external merchants as partners, we added over 42% merchants on a year-on-year basis and also extended our coverage into new geographies, ensure that we also bring fresh fashion and better brands, especially regional brands of their choice. We added over 60,000 new SKUs and 427 brands to them.

On the Partner Brands, which is more on the premium and luxury brands, that business saw 80% growth year-on-year because of better footfalls, expansion to new format, which got launched new geographies. And so our AJIO Luxe, which is really a destination for luxury and premium brands, that business grew 3.5x year-on-year. We have over 42,000 options live on that destination format. We also launched Rowan, which is a new format from Reliance as a toy store, which is a small format typically around 500 to 1,000 square foot in size, selling more affordable toys. So that format got launched during this quarter and we will also see a further ramp up as we go along. We also launched Starter through its apparel line and also extended Gas brand into kids wear as some of the big initiatives in the Partner part of the business.

On Jewelry business, the festive sales started to really bring back growth in this quarter. The network expansion also grew, and combined the business grew 16% on a year-on-year basis. The business has been leading on to its capabilities for our product designs and through all the in-house design labs that has created for jewelry, it has launched 7 collections during this quarter alone and getting tremendous level of response from our customers.

Lingerie, we had a very broad-based growth across all the brands that we operate now, Zivame, Amanté and Clovia. The Grand Lingerie Festival, which is a very large event from Zivame, that continues to do well. It also drove double-digit volume growth for the brand and had a very, very positive reaction from the customers as well from the choice perspective. This is also a category where there's a lot of product innovation happening. We continue to expand into new product lines in shapewear. We also launched product lines using sustainable products on the bamboo-based fabrics. So a lot happening on the Lingerie part of the business as well.

Moving on to Grocery. Grocery delivered its best-ever quarter. Overall for Grocery, we doubled our business on a year-on-year basis. From a [indiscernible] perspective, high double digit like-for-like growth, led by high footfalls and average bill values. Two key events, Full Paisa Vasool as well as Tyohaar Ready sales, these are 2 flagship events and both the events saw 65%, 96%, respectively, growth on a year-on-year basis. So a lot of traction from the consumers to come and shop on our format. Our focus on making our stores more engaging for the customers. That is being done through premiumization and also localization of a lot of assortment from a customer's perspective. So launch of a range of local rice as staple options, launch of low-calorie potatoes, branded coconuts, these are some of the examples of how we have been really driving premiumization into the stores.

From a category -- because this is also an early buying season from a festivities point of view was driven by sweets and confectionaries as well as staples, F&V and dairy. We continue to strengthen our own brand play as well. We launched several products and [indiscernible] during this period. Some of the notable ones include packaged water under the brand called Sure. And some of the other brands like Masti and Meister/Jive Deo, I think these are the brands that also launched a large number of new products.

On the New Commerce side, the merchant base continues to scale up. We grew 4x year-on-year on the merchant side revenue, all time high for the business in this segment as well. To continue to strengthen fulfillment and supply chain capabilities to ensure that all the fill rates and the SLAs for our supply chain are delivered on time, we commissioned 57 new facilities and we continue to add more and more infrastructure to ensure that our customers are able to serve better. And that is also visible from the cohort where we see that customers who are now well over a year into the platform and their buying is now well over 4x than customers who have just joined the platform.

Talking through on the JioMart and Milkbasket. So JioMart is a horizontal play across all wide categories, and we continue to add and bolster its capabilities through expansion of catalog and also seller base which grew multifold this quarter. We talked about launch of WhatsApp JioMart initiative, although it's still early and that initiative is gaining momentum week after week. What is heartening to see is that it has really democratized the access to online shopping. And we have seen 37% of the customers who have come from WhatsApp are customers were actually shop first-time on JioMart. So it is really taking us to a new set of customers and we'll continue to see that growth as we go along. Some of the other initiatives like Tyohaar Ready sale, which also grew in our stores, that registered 2.5x growth in traffic as well as 3x installations in app.

While the Milkbasket business, which was acquired last year, that business is now fully integrated into our JioMart business and we continue to grow that business, capitalizing on festivities, events, and that has doubled over last year.

Looking at Pharma. Pharma business also grew 2.5x year-on-year, and that has been very stable across all the channels. So we saw digital commerce orders up 95% and also nearly 85% of those stores are now hyperlocal enabled. So the delivery to the customers can be serviced through the nearest store, which ensures better delivery times and happier customers because they get access to the products on time. Our New Commerce business has a very steady growth path. Our operations are now expanded to over 2,500 cities.

In Furniture and Decor business, which is led by Urban Ladder, that business also saw a very strong revenue growth over last year, led by footfalls. Our flagship event, the full house sale really drove revenues for the business with 30% growth year-on-year and that happened through a broad base of categories, including the bed, dining room, living room, seating and essentials.

So as we look into the second half of the year, which is also marked by winter, which is very strong buying for north east as well as west part of the country. Also festivities and wedding season coming in, we will ensure that the growth momentum for the business continues with a focus on number one, to be looking at expansion of our stores as well as digital commerce channels. We will be looking at continuing to onboard more and more merchants through our new commerce initiatives across the categories including increasing the share of wallet for all the onboarded merchants. Also to continue to invest in supply chain capabilities, which has been really a big enabler for all our stores and channels and drive efficiencies. Also strengthen our capabilities in product development, which is really one of the big cornerstones for our formats and strengthen people capabilities, which will be also supplemented by a lot of training efforts that we wish to undertake.

That's all from my side.

[Sanjay Roy, executive]

Good evening to everyone. Just to give you an overall outcome of the second quarter. Now it was a solid quarter for the Oil and Gas business. As you can see, the EBITDA was up by nearly 16% and margins were up by -- up to 82.3%, mainly on the back of higher gas price realizations, sustained production, the field performance has been very much in line with our expectations, which is a big positive. And also in terms of higher exchange rates. So overall, the EBITDA was -- we saw good growth in EBITDA in this quarter. Next slide, please.

With respect to the MJ gas condensate field project, we are very much on track for first gas by the end of the year. The offshore installation campaign has been completed. So the subsea production system has been installed. The Phase 2 drilling and completion campaign is currently underway. We've completed 1 well and we are on track for completion of 7 wells. Further, the FPSO has sailed from [ Geoje ], South Korea, and it has been at the Kakinada anchorage, which is finishing [indiscernible] on that FPSO, and now it's ready to sail in a few days towards location. The next set of activities would include the hookups, the offshore testing, the pre-commissioning and commissioning and thereafter the introduction of hydrocarbon for first gas production, which is expected by year-end. Next slide, please.

So just to give you a perspective on the gas markets and the LNG outlook. So LNG remains quite -- the markets remain quite tight, despite supply of LNG being at a peak level, the shortfall in supplies due to the conflict still remains. Consequently, we have seen prices go up to almost $98 per MMBtu, although it's more or less now settled at $45 per MMBtu and less. The EU continues to refuse sourcing gas from Russia. And they even look at European joint bids so that they do not have the imbalances in pricing. Meanwhile they're also looking at "Save the gas for the safe winter," that policy is currently underway.

Overall, Asian LNG continues to track at the EU prices. And as we don't expect any major capacities of LNG coming in before the year '26, we expect the markets to remain tight for LNG. In India, the gas market remains quite resilient. We have seen consumption of about 163 million standard cubic meters per day during the quarter, slightly less. But then again, this may be due to the elevated costs and prices, particularly of LNG. Now the LNG demand came down largely because of the production, particularly from the KG-D6 gas.

In terms of prices, 2 things. One is the government announced the revision -- revised price for the second half of the year, revised it from $9.92 from the first half to $12.46 per million British thermal units for the second half. So that implies we should expect better realizations in the upcoming quarter. Meanwhile, there's also been a committee formed under Dr. Kirit Parekh. And this committee is looking at the natural gas pricing. It is represented by the upstream industry through the AOGO. There is also representation from the consumers as buyers, potentially the upstream -- the producers are saying that prices should be -- there should be marketing and pricing freedom, pursuant to the policies in the contracts.

India, the solution to price -- the elevated price is incremental production as we have seen in the case of KG-D6, and these investments will have to happen in frontier areas where there seems to be larger potential for such investments, you will need a huge scale of investments, billions of dollars. And for that to sustain, marketing and pricing freedom will be very important, particularly as costs are market-driven. So prices need to be similar, whereas we are all seeing a representation, the consumers who have been projecting that there needs to be some kind of cap, particularly in gas. So we are still awaiting the recommendations. This is expected to come out in the next few weeks. Overall, the outlook for gas/LNG looks quite tight in the near future. So we expect realizations to remain firm. And with the augmentation of production from MJ, we expect the earnings to go upwards.

Thank you, and a very happy Diwali to all of you.

[Srikanth Venkatachari, executive]

Thank you, Sanjay. So moving to the last section on O2C. Just 2 slides on what the energy market rather how the energy markets were. As you know, a lot of volatility which we've have seen prices for oil between $125 and $85, LNG prices anywhere from $35 MMBtu to $71 MMBtu. Crude prices for the quarter did ease on the back of SPR release, we saw increased production from Saudi. We also saw that Russian supplies were fairly resilient. The LNG prices were very strong on the back of uncertainty of supply as well as strong demand. Ethane prices actually came lower on the back of -- which was actually tracking U.S. gas. It was also tracking the fact that petrochemicals were weak and also that the Freeport LNG terminal had an extended outage. Interesting, on the refining side, we saw everything, we saw historic highs in June to even briefly negative territory in this quarter. So overall, it was about macro uncertainty. It was about geopolitical uncertainty, which was underpinning the energy markets. Move to the next slide, please.

Just a pictorial and you can see the graph to the right of the dotted line is really -- tells you about the markets. You can see the fall in the prices of oil starting from $125, much lower. Of course, on gas, you saw the other way around, but volatile went up and average is much higher than previous quarter. Ethane prices sharp fall during the quarter.

On the light distillate side, again, interesting, you saw $40 cracks and then almost 0. Mid distillates touching $75-plus and then trading around $40. Singapore refining complex $35 at one time, almost 0. So this is the kind of environment in which the O2C business was operating in. Next slide, please.

And in that context, when you see revenues and EBITDA about close to INR 12,000 crores, it was, on a year-on-year basis, lowered by 6% and on quarter-on-quarter by 40%. But when you look at EBITDA on a year-on-year basis, there was strength in mid distillate cracks. It was, however, offset by significant weakness in petrochemical margins. Of course, the fact that SAED related cost was very much there. It was about INR 4,039 to these numbers. Had it not been for that, the EBITDA would have been INR 11,968 crores plus INR 4,039 crores. We also -- when you look at petrochemical side, the margins declined anywhere between 15% to 30%. And on the back of subdued demand in both China and India, MEG was particularly weak. Also, of course, in this quarter, we also had -- the production meant for sale was lower by 3.6% on a year-on-year basis given the planned turnaround in the refinery units.

On the Q-o-Q, the explanation for Q-o-Q is more about -- all about margins, lower fuel margins, lower downstream EBITDA margins. And of course, SAED remains a common factor from explanation for both year-on-year as well as quarter-on-quarter. Next slide.

So in this context, when you look at -- these are the relevant demand parameters, you can see that oil demand strongly up 1.2 million barrels per day and this is on the back of opening up, removing of all the curves and importantly, gas to oil switching. And because gas prices were so high, demand was strong. On the polymer and polyester side, you can see the percentages between 1% to 2%, stable, I would say. We saw stable demand in almost every use between agriculture, health and hygiene, consumer durables, we saw it everywhere, but it does -- growth rates were small, but demand was stable.

Operating rates both for cracker as well as refining did see a pickup on the strength -- on the basis that the middle distillate cracks was strong and so people were using their -- using production to the maximum extent possible. So in this background, yes, supply was possible because of the increased utilization. Specifically in oil demand, 10% growth on a quarter -- on a year-on-year basis, gasoline demand up 9% on the back of automobile sales, tourism, we have seen that. On high-speed diesel, that was also up 11% because economic activity was normalized. We saw strong demand also as one of the reasons. We also saw commercial vehicle sales increase. So all of them explaining the HSD's demand.

ATF was, on a percentage terms, sharply up 64%. However, as you know, it was coming off a lower base. Load factor definitely in September at 84% was well above the 73% we saw in '21. So yes, that's the demand side. And when you look at demand in polymer and polyester, I talked about the 1% growth in polymer. This was more led by PVC, we saw strong growth in, 1% up. However, both -- PP was impacted by lower demand in EU and U.S. and some of the applications of PP. And also there were outages in by Indian produces and therefore, that impact -- that did impact demand.

Polyester side, 2% up. We saw good growth in PET up 11%, and also stable fiber but PFY was lower. So there was stable domestic consumption overall.

This is where you can see a very sharp fall in some of the explanation for why earnings were weak or didn't grow that much. Weak on a quarter-on-quarter basis as well as on a year-on-year basis. So if you look at polymer deltas, anywhere down on a quarter-on-quarter basis between 12% and 26%, PP, PE, PVC, all of them. And the point being that polymer prices were lower between 17% and 30%. And that prices on an absolute prices softness was way beyond the input price, which is naphtha, which is down 19% on a Q-on-Q, thus essentially affecting margins. Also, some of the improvement in the debottlenecking of logistical -- logistics constraint and freight, et cetera, also meant that it resulted in lower realization.

On the polyester delta side, chain delta has been probably flat as you can see $600 there per tonne. And there, we saw margins were actually on downstream between 25% and 30%. But really offset by weak PTA and MEG margins. So that's something that we saw. That's why overall didn't change. PX margins firmed up as integrated players like us optimized PX production to capture higher gasoline margins. So we did that. So overall, that's a lot of impact on deltas and therefore -- and its implication, therefore, on the overall EBITDA. Next slide.

On the transportation fuel side, as you can see, demand for gasoil was up on -- for this quarter. And all these explanations you can see on a quarter-on-quarter basis. Overall, we did see a fall in cracks from $52 to $42, but still, it has remained broadly elevated because of the gas to oil switching that I talked about. The fact that even inventories, while it has gone up, it is significantly below the 5-year averaged and also some of the quota -- China export quota also eased some of the supply constraints. So that's obvious. Year-on-year, you can see that $8 for Gasoil became $41. So that also explains why the overall fall in margins rather than EBITDA earnings is much more muted on a year-on-year basis. Similarly, on ATF/Kero, we did see a sharp growth of almost 0.9 million barrels per day. And primarily, I would say, is in Asia Pacific. And our cracks remained elevated, but declined on a quarter-on-quarter basis. So sequentially, we see -- most of these margins are strong, but on sequence-base -- sequential basis is lower. So that's clear -- that is to explain why Q-o-Q was also low. Next slide, please.

On Gasoline side, as you can see, demand is strong, almost 1 million barrels, of which half of them was here in Asia Pacific. But again, perhaps if you were to see $30 becoming almost $9, and that is because U.S. demand was not up to the expectations on the back of high petrol prices at the pump level and also lower discretionary spending. We also saw that the fact that because gasoline -- gasoil was so much in demand, refinery utilization rates that we saw earlier on also meant that higher gasoline supply so that put pressure on gasoline and also the fact that tanker rates continue to be high had an impact on the inventory levels that were being held and therefore, it did pressurized cracks there.

On the operating rates, I mentioned about lower throughputs, and that is on the back of both planned turnarounds in both the primary and secondary units of SEZ for maintenance and inspection. We did increase naphtha sourcing to capture reforming margins because as you saw, gasoline was good at the earlier part of this quarter, and we focused on maximizing gasoil exports given the demand. Aromatics production, again, we've rationalized that in favor of gasoline given the economics and thanks to the fact that the gasifiers performed very well meant that we didn't have to import any kind of LNG and therefore keep a control on the cost. Next slide, please.

So bringing down to the -- or the last slide on the O2C business. So we do expect demand to be -- continue to be strong this year, which is almost 2 million barrels increase on a year-on-year basis, and all the sanctions and all that will mean that as far as some of the products are concerned, Asian/ME refiners could benefit a bit there. Margin environment, middle distillate definitely, given where gas prices are, we continue to be in demand. And the polymer margins, we are looking forward to improving as and when China opens because the feedstock prices have been pretty attractive for conversion.

On the demand side, again, opening up means fuel demand is good. Gas to oil switching continues to be a factor everywhere, even as more so as winter sets in and festive season, which we are seeing now in this quarter should also -- is benefiting or should benefit.

On the challenges side, as you know, overall GDP growth, weakness, inflation and the monetary policy, interest costs, all of them are definitely areas of concern and freight rates continue to remain high. And the Chinese export quota means that it is [indiscernible] keeping the market supplied as far as margins are concerned.

So really to summarize, given this backdrop and the whole set of slides, which I talked about and including what Sanjay talked about on the LNG environment, we've seen that kind of volatility. In that context, I think the performance -- it's a strong performance. It's a resilient performance given the kind of volatility macro as well as energy. And you know I had mentioned that consolidated EBITDA for quarter 2 in aggregate was INR 34,663 crores means a growth of 14.5%. Had it not been for SAED-related cost, which is INR 4,039 crores, the growth in EBITDA would have been almost 28% higher and this would have also translated into a healthy net profit growth on a year-on-year basis. However, I would say that given that equal mix now that we have between consumer, business and energy, we have been able to weather this volatility pretty well.

And as you saw in Gaurav's presentation on Retail, the store expansion that we saw, the omnichannel retail strategy, the footfalls, the digital channels that are -- all of them are kicking in very well. Similarly, on the on Jio side, customer addition, almost 7.7 million customers in this quarter, the improvement in the customer engagement metrics remain very good. And Kiran talked about the 5G services and the -- why the standalone is -- provides us with a lot of opportunity to grow. And as Sanjay talked about, the KG-D6, the MJ field commissioning by year-end will mean that currently, we are at 20% of production, we can be 30% of India's gas production. So looking forward to that and also the fact that prices will be higher.

Let me take this opportunity to thank you all and wish you all a very, very happy Diwali. Thanks so much.