RIL annual report: 10 key takeaways from Jefferies
Synopsis Jefferies' review of Reliance Industries' FY25 annual report highlights robust FCF, disciplined capex, and growth drivers across Jio, Retail, and New Energy. The brokerage maintains a Buy rating with a Rs 1,670 target, citing long-term value creation. Jefferies has released its analysis of Reliance Industries' FY25 annual report, highlighting trends across Jio, Retail, and Energy businesses, along with capex patterns, free cash flow (FCF), and future growth areas. The brokerage has maintained a Buy rating on the stock with a price target of Rs 1,670.
ADVERTISEMENT With sustained FCF generation, disciplined capex allocation, and visible traction in consumer and new energy businesses, Jefferies continues to view Reliance Industries as a core long-term play. Here are 10 key takeaways from Jefferies:
Jefferies noted that Reliance's capitalized costs rose 48% year-on-year (y/y) to USD 5.7 billion, driven by Jio and Retail. Jio saw a 7% y/y increase (USD 1.2 billion in fiber and USD 1.2 billion in spectrum costs capitalized to the balance sheet). Retail's capitalized costs rose 128% y/y to USD 2.3 billion, mainly due to Unamortized Customer Acquisition Cost and Digital Platform development.
Despite higher capitalization, consolidated capex fell 14% y/y to USD 16.6 billion, led by Jio (USD 5.5 billion) and standalone (USD 4.4 billion). Retail capex rose sharply 37% y/y to USD 3.3 billion. Intangibles and CWIP in Retail now form 49% of fixed assets (up from 44% y/y).
ADVERTISEMENT For the second consecutive year, Reliance reported positive free cash flows. Consolidated operating cash flow rose 10% y/y to USD 20.9 billion with a working capital/EBITDA conversion of 108%. Jio reported headline FCF of USD 1.8 billion, while Retail reported headline FCF of USD 0.6 billion. Unlock 500+ Stock Recos on App Net debt increased due to large interest capitalization and investment in Jio Hotstar. Net debt in spectrum liabilities rose 5% y/y to USD 29.8 billion. Overall net debt rose 9% y/y to USD 3.3 billion, with Jio's net debt at USD 21.5 billion. The cost of debt rose 65 bps y/y to 9.6%, while share of Rs debt increased to 43% (FY24: 40%).
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Consolidated return ratios weakened. ROCE declined y/y to 7% due to O2C profitability dip, with standalone ROCE at 7.1% (vs. 11.3%). Retail's ROCE fell marginally to 7.2%, while Jio's ROCE was at 5.7%.
ADVERTISEMENT Energy investments have been shifted under the standalone balance sheet and not disclosed separately. Reliance continues to advance projects such as a 10GW poly-silicon to PV module plant, 30GWh LFP battery cell plant, and a GW-scale electrolyser facility, scheduled for commissioning in phases across CY25–26.Retail remains a key focus, with Jefferies noting that 'key focus is to accelerate growth in Retail already visible in 1QFY26 result'. The FMCG business is expected to see greater traction with the planned carve-out in FY26.
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Jio is focusing on driving 5G rollouts, scaling home broadband, and expanding enterprise offerings. Jefferies highlighted that 'over 5x y/y jump in third-party revenues for Jio Platforms and Jio Infocomm turning FCF positive were the key positives.'
Revenue (B): Rs 9,646.9 in FY25E → Rs 12,268.5 in FY28E
Rs 9,646.9 in FY25E → Rs 12,268.5 in FY28E EBITDA (B): Rs 1,654.4 in FY25E → Rs 2,290.5 in FY28E
Rs 1,654.4 in FY25E → Rs 2,290.5 in FY28E Net Profit (B): Rs 696.5 in FY25E → Rs 1,032.9 in FY28E
Rs 696.5 in FY25E → Rs 1,032.9 in FY28E EPS: 51.50 in FY25E → 76.23 in FY28E
Jefferies reiterated that Reliance maintains a sustainable competitive advantage through scale economics, cost leadership, and financial strength. The report noted, 'Rs 6 trillion FCF invested in consumer businesses has created Rs 18 trillion in equity value.' New growth engines include Digital in Jio, Q-commerce in Retail, and the New Energy business.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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