Structurally the refining business continues to be tepid and one would be interested in what the company says about their outlook, says Probal Sen, Senior V-P, Research, Centrum Broking. What is your take on Reliance Industries?On a sequential basis, a couple of things are moving in its favour. The retail business will continue to move towards normalcy post Covid. Some part of that journey started in Q2 itself but I think that momentum will continue. My sense is that EBIT or margins or earnings from the retail segment will go up maybe 20% on a quarter-on-quarter basis. The other significant aspect is that the petrochemical business seems to be on a much stronger track than it has been over the last six to nine months. Reliance with its sourcing and offtake flexibility has managed to keep volumes at a decent level. Margins have suffered and what is happening now is that the domestic market is coming back and as a result, margins in the domestic market for Reliance’s petchem business are definitely 10-15% higher than what they would be if they were to export a larger volume, which has happened in the last couple of quarters. So even petchem margins probably would be 12-13% higher Q-o-Q. Jio probably is more of a steady state story with 6-7 million subscribers, similar to the run rate that was there last quarter. Another 2-3% improvement in ARPUs will get it closer to 150 but we need to note that some part of this ARPU improvement could be because of FTTA subscribers and are now part of the overall revenue. The company has not started bifurcating the voice revenue and the fibre revenue as of now, we will see what they start doing from this quarter but my sense is that the ARPU improvement is more due to the higher ARPU inherent in the fibre business which makes a difference rather than any improvement in the voice ARPU at least in this quarter. On an overall basis, against the Rs 18,000-19,000 odd crore of EBITDA, we expect them to clear Rs 21,000 crore for this quarter which is still 5- 6% lower on a YoY basis and is primarily driven by the fact that refining remains the one worry where one expects the GRMs to continue to be tepid at $6 kind of a mark and therefore much much lower than the $8-9 that one was still seeing even a year ago. That is the one segment where one would look forward to the management commentary on the outlook in terms of when it can recover but the rest of the other businesses are likely to show a strong momentum. The lower interest cost will be a crucial monitorable after all the cash that has flowed into the company over the last year or so. Now people will look at every quarter to see how much of the debt is actually being retired or paid-off and what kind of an impact that is having on the interest costs and hence the profitability of the company. This is an important driver and now it would be seen every quarter whether the promise of the higher cash flow being generated gets reflected in the leverage being retired or reduced as soon as possible so that they can get to the zero net debt number. Effectively, they have already done it but in the books it will probably take another six to nine months to fully reflect. That will be the interesting driver to look at over the next couple of quarters. A lot of different factors are at play. From a market standpoint, do you feel that the attention will be more focussed on the old economy business this time?Yes, what is ironic is for the last two years, we have been completely forgetting the OTC business which is still at the end of the day 40-45% of your EBITDA. The story about retail and Jio is well known and the recovery does seem to be taking hold. Jio never really went away and the growth has slowed down a bit. It is understandable that on a higher base, retail is coming back strongly. Petchem starting to recover is a big positive. The only worry remains that the refining business where globally reports indicate that 2-2.5 million barrels a day of refining capacity should go off line. Parts of it have already gone offline over the last few months and the rest will happen over the next 12-18 months give or take. The supply additions continue to run ahead and demand growth is not that exciting at least based on the estimates that we see with respect to the Covid recovery. It is probably another 12-18 months before we see the demand for ATF globally getting back to near normal levels and the same holds true for transportation fuel demand which is 40% of global demand products anyways. That remains a little bit of a worry. People will also look at one small aspect that I forgot to mention — the kind of spot LNG price increase that one has seen in the last month or two should reflect on or support the GRMs. If it continues over the next few months because the petcoke gasify starts to make serious money, if the comparable LNG prices are more than $7.5, given the kind of slopes that we are seeing for LNG prices, running the petcoke gasifier at a higher level and cutting down on your LNG imports should be something that one would see. That is a support factor but structurally the refining business continues to be tepid and one would be interested to see what the company says about their outlook and it will be important to look at just cash flows and earnings over the next six to nine months.