Listing of consumer verticals, new energy scale-up key triggers for RIL

Business Standard

28-04-2025

Barring the upstream business vertical, most segments of the country's largest listed company by market capitalisation, Reliance Industries (RIL), performed in line or beat estimates in the March quarter of the financial year 2024-25 (Q4FY25). The key takeaway was the strong show of the retail vertical, which coupled with the digital business powered the 3.1 per cent year-on-year (Y-o-Y) growth in operating profits at the consolidated level.
The consumer businesses were thus able to offset the 10 per cent operating profit decline in the oil-to-chemicals or O2C segment. Given the recovery in retail, petchem margins and scale-up in new energy business, most brokerages have a buy rating on RIL. The stock is the top gainer among Sensex stocks in Monday's morning trade rising 4.2 per cent.
In addition to the new energy business, Systematix Research believes that further re-rating is imminent with triggers being domestic growth in the petchem business, tariff hikes and broadband expansion in telecom, growth across retail's physical and online stores and listing of telecom and retail verticals.
While there are multiple triggers going ahead, it was the recovery in the retail vertical which caught the Street's attention. After a slow start in the first half of the year on account of elections and monsoons, there was broadbased growth across key segments in the second half led by the festive season, weddings, Mahakumbh and an early summer. In addition to this, net addition of 238 stores taking the total store count to 19,340, robust footfall growth and strong traction in online sales also aided the retail topline.
The gains were also reflected at the operating profit level for the vertical as the metric saw a 14.3 per cent jump over the year-ago quarter. In addition to the top line growth, what aided profit, according to the company, was three quarters of significant streamlining and rationalisation. Margins for the retail segment expanded by 25 basis points Y-o-Y to 5.8 per cent and was much higher than the Street estimates.
Given the strong show, analysts led by Aditya Bansal of Motilal Oswal Research have raised their FY26-27 revenue and operating profit estimates by 2 per cent and have built in annual growth of 14-15 per cent in revenue and operating profit over FY25-27.
The telecom business saw a 2 per cent growth in revenue on a sequential basis with gains from tariff hike and normalisation of subscriber base offset by two fewer days in the quarter. Net subscriber additions were higher at 6.1 million with growth both in 5G user base and ramp up in fixed wireless access user base.
While average revenue per user was up 14 per cent Y-o-Y, they went up marginally by 1 per cent Q-o-Q to Rs 206.2 and was lower than Street estimates. While operating profit was 2 per cent higher, it missed estimates due to muted revenues and higher costs.
On the O2C business, the operating profit was down 10 per cent over the year-ago quarter given weak transportation fuel cracks. On a sequential basis, there was an increase by 5 per cent on the back of modestly higher realised margins, higher marketing contribution driven by increased domestic placement and feedstock optimisation, says Hemang Khanna of Nomura Research. The upstream operating profit was a disappointment as operating profit dipped 8 per cent on a sequential basis due to lower KG D6 production.