Reliance Industries’ Q2 FY25 Performance

Date: October 14, 2024

Key Financials:

• Revenue: ₹2,35,481 crore (up by 0.2% YoY)
• Net Profit: ₹19,323 crore (down by 2.8% YoY)

Reliance Industries’ second-quarter results for FY25 showcased modest revenue growth, but certain sectors of the business continue to present value opportunities despite the overall slowdown.

1. Oil to Chemicals (O2C) Business

• Revenue: ₹1,55,580 crore (up 5.1% YoY)
• EBITDA: ₹12,413 crore (down 23.7% YoY)

The oil to chemicals segment remains a core revenue driver for RIL, contributing significantly to the topline. While margins took a hit due to a sharp decline in transportation fuel cracks and downstream chemical deltas, this could present a value pick for long-term investors considering potential recovery in global demand.

• Opportunities for Value: Increased volumes and domestic placements suggest potential resilience and recovery when global market conditions improve.

2. Digital Services (Jio Platforms)

• Revenue: ₹31,709 crore (up 18% YoY)
• Net Profit: ₹6,536 crore (up 23.4% YoY)

The digital services sector, through Jio Platforms, continues its strong growth trajectory. Jio’s significant subscriber base and the rollout of new services such as Jio AirFiber and AI-Cloud underline the robust potential for further revenue growth.

• Opportunities for Value: The digital services business is rapidly expanding, driven by tariff hikes, subscriber growth in 5G networks, and new offerings like AI-Cloud. As a high-margin segment, it provides an attractive opportunity for long-term investors.

3. Retail Segment

• Revenue: ₹66,502 crore (down 3.5% YoY)
• EBITDA: ₹5,675 crore (up 1% YoY)

Although revenue from the retail business dipped slightly, the EBITDA growth and improvement in margins indicate effective cost management and operational streamlining. The company’s expanding store network and partnerships (e.g., Delta Galil) offer value potential in the fashion and lifestyle categories.

• Opportunities for Value: With 464 new stores and a growing customer base, Reliance Retail is well-positioned for recovery in consumer demand, especially as the macroeconomic environment stabilizes.

4. New Energy Initiatives

Reliance’s new energy giga-factories are on track to commence production of solar PV modules by the end of the year. This venture could be a future game-changer for the company, contributing to long-term sustainability and diversification away from oil dependence.

• Opportunities for Value: The solar PV module production is part of Reliance’s broader strategy to pivot towards cleaner energy, which may unlock substantial long-term value for investors seeking exposure to renewable energy.

5. Oil & Gas Segment

• Revenue: ₹6,222 crore (down 6% YoY)
• EBITDA: ₹5,290 crore (up 11% YoY)

Despite lower price realization, the Oil & Gas segment saw a strong EBITDA growth, mainly due to increased production from its KG D6 and CBM fields.

• Opportunities for Value: The ongoing increase in production and a favorable ceiling price for KG D6 gas offer solid growth prospects for this segment.

Conclusion

Reliance Industries presents multiple value opportunities across its diverse business verticals. Investors could consider Digital Services for high growth potential, Retail for recovery prospects, New Energy for long-term sustainability, and Oil to Chemicals for cyclical recovery. As Reliance navigates the evolving business landscape, these segments provide a balanced mix of immediate and long-term value drivers.

This article aims to guide investors on where they may find value within Reliance’s diversified portfolio, based on its Q2 FY25 performance.