MUMBAI (NewsRise) -- Billionaire Mukesh Ambani's Reliance Industries said its wireless venture Reliance Jio Infocomm posted an operating profit in the first quarter of its commercial operations, after triggering a price war that shook India's telecommunications market.
The performance of Jio and higher margins from its core refining and petrochemical businesses powered the conglomerate's consolidated second-quarter net profit to a better-than-expected 12.5% increase.
Net income rose to 81.09 billion rupees ($1.25 billion) in the quarter ended in September, the Mumbai-based company said in a statement to exchanges on Friday. Revenue grew 24% to 1.01 trillion rupees. Analysts had expected a profit of 77.10 billion rupees.
Jio reported a net loss of 2.71 billion rupees during the period. However, it had operating margins of 24%, beating analysts' expectation that the venture may be barely breaking even in the wireless business. This is the first time the company is reporting the financial performance of the wireless business after it rolled out services in September last year, offering months of free voice calls and data plans.
Jio's strategy of slashing prices to attract subscribers roiled India's telecom market industry, eroding revenue and profits of rivals such as Bharti Airtel, Vodafone and Idea Cellular. The cut price offers helped the company acquire around 100 million users in just six months.
Last month, Jio launched an advanced Internet-enabled feature phone that was offered to users virtually free of cost. A regulatory decision to cut the interconnection charges mobile phone operators pay each other is expected to add momentum to Jio's earnings in the coming quarters.
The company aims to expand its coverage to 95% of the country by next year.
Jio's financial results demonstrate "the robust business model and the significant efficiencies" in the 4G technology," said Ambani, the chairman and managing director of Reliance Industries.
The company's average revenue per user stood at 156.4 rupees. It had 139 million subscribers at the end of the quarter.
Reliance, the operator of the world's biggest oil-refinery complex, said its operating earnings in the refining business expanded 11%, while earnings at the petrochemicals business jumped 45%.
Gross refining margin -- the difference between the total value of petroleum products and the price of crude oil -- grew 1.9% on-year to $12 per barrel, up from $11.9 per barrel in the previous quarter. Analysts were expecting the company's refining margins to rise to $12.5 per barrel. The company's capital expenditure in the quarter was $2.4 billion on account of projects in the petrochemicals and refining business as well as digital services.
The investments come as fuel consumption in Asia's third-largest economy is growing at a scorching pace. India's is set to be the fastest-growing crude-consumer in the world by 2040, according to the International Energy Agency.
Ahead of the earnings announcement, Reliance shares rose 0.5% in Mumbai trading, while the benchmark BSE Sensex gained 0.8%.
--Dhanya Ann Thoppil