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Reliance Industries Limited (RIL), the oil-to-telecom conglomerate led by billionaire Mukesh Ambani, is set to announce its financial results for the July-September quarter of fiscal 2024-25 (Q2FY25) on Monday, October 14, 2024. The company's board meeting will take place on the same day to review and approve the quarterly results. The meeting also aims to finalize the record date for the 1:1 bonus share issuance, previously approved during the August 2024 annual general meeting (AGM). This bonus issue, considered an "early Diwali gift" for investors, is poised to be the largest in India's stock market.
Analysts anticipate a muted growth in RIL's Q2 results, primarily due to a decline in the oil-to-chemicals (O2C) business. The O2C segment's EBITDA is expected to fall by up to 27 per cent year-on-year (YoY) and 10 per cent quarter-on-quarter (QoQ) due to weak refining and petrochemical performance. The global brokerage Jefferies projects a one per cent decline in EBITDA for the O2C segment compared to the previous quarter, citing weak macro trends and reduced margins. Antique Stock Broking attributes the O2C weakness to flat Singapore GRM, lower diesel spreads, and a sharp drop in PX and Benzene margins QoQ. Despite these headwinds, they anticipate higher Russian discounts, renewed Venezuelan crude imports, and the resumption of European diesel exports to mitigate the QoQ EBITDA drop, limiting it to just 3.1 per cent.
However, despite the O2C challenges, RIL's net EBITDA is projected to experience an overall increase. Global brokerage Jefferies predicts a 5 per cent YoY rise in net EBITDA, but a four per cent QoQ decline to ₹4,999 crore. Domestic brokerage JM Financial Services expects a more robust 2.5 per cent QoQ growth in RIL's EBITDA, reaching ₹39,700 crore. They attribute this growth to a substantial 9.4 per cent QoQ increase in digital EBITDA driven by tariff hikes, partially offset by a 3.9 per cent QoQ decrease in the O2C segment. Motilal Oswal Financial Services forecasts a flat YoY consolidated EBITDA of ₹39,700 crore and a 26 per cent YoY decline in standalone EBITDA to ₹14,100 crore.
On the profitability front, a majority of D-Street brokerages anticipate a 1-13 per cent decrease in reported profits for Q2FY25 compared to the previous year. Kotak Institutional, however, predicts a modest 2.2 per cent increase. ICICI Securities highlights the potential for softness in RIL's upstream business, with a slight production decline and higher profit petroleum share for the government impacting margins. Prabhudas Lilladher expects muted refining throughput at 17 mmtpa and a subdued petchem performance, further contributing to a projected 9-10 per cent YoY drop in net profit.
RIL's telecom business is anticipated to be a key driver of EBITDA growth, with Antique Stock Broking expecting a marginal 2.8 per cent QoQ increase. They attribute this growth primarily to the telecom segment, forecasting a 10.5 per cent QoQ rise in telecom EBITDA driven by a six per cent ARPU growth, while subscriber numbers remain relatively flat due to SIM consolidation. Reliance Jio is expected to demonstrate steady performance despite the recent price hikes, with a 0.6 per cent QoQ subscriber growth and a seven per cent QoQ ARPU growth. The retail segment's profitability is also projected to remain resilient. Nuvama Institutional Equities anticipates a substantial 13 per cent YoY and five per cent QoQ surge in Jio's EBITDA, driven by high ARPU, offsetting a two per cent QoQ moderation in subscriber numbers.
RIL's retail business is expected to see a more modest growth, with JM Financials projecting a 0.6 per cent QoQ increase in EBITDA, reaching ₹5,700 crore. They cite ongoing store rationalization and the impact of heavy monsoon as contributing factors. Industry experts anticipate a largely flat performance for RIL's retail business, mirroring the broader macro trend in the industry. Reliance Retail director Isha Ambani has ambitious plans, aiming to double the retail business in the next three to four years. This ambition is backed by the retail arm's strong performance, with a gross revenue of ₹3.06 lakh crore ($36.8 billion) in the fiscal year ended March 31, 2024, representing a 17.8 per cent year-on-year growth. Reliance Retail has secured a prominent position among the top-10 retailers globally and ranks among the top-30 in terms of revenue.
Overall, Reliance Industries' Q2FY25 results are likely to be a mixed bag, with a strong performance from the telecom business and a muted performance from the O2C segment. Investors will be closely watching the key financial metrics, including net EBITDA, net profit, and the performance of individual business segments. The upcoming board meeting on October 14 will provide crucial insights into RIL's future direction and the impact of the bonus share issuance on shareholder value.
Source: Reliance Industries Q2 results tomorrow: Net EBITDA to O2C biz—5 key things to watch out for