Can comforts match perils for Reliance in FY26?

Notably, despite the seasonality factor of the festival-led consumption boost in Q3, retail revenue and Ebitda fell just 1-2% sequentially. Year-on-year retail revenue was up 16% to ₹78,622 crore. The number of total stores stood at 19,340 as on 31 March, representing just 3% growth based on the average of the past two quarters and Q4-end figures. Thus, average revenue per store grew by an impressive 13%. Amid stiff competition from quick commerce companies, JioMart’s quick commerce gained traction, and it saw 2.4x sequential growth in daily orders by FY25-end.

Overall retail Ebitda margin was flattish sequentially, though it was down 10 basis points year-on-year to 8.3%. RIL’s own consumer FMCG business, including the “Independence" brand, achieved sales of ₹11,450 crore for FY25. However, given the less than 5% contribution to total retail revenue, this is unlikely to have had any meaningful impact on Ebitda margin.

In the telecom business, a part of Jio Platforms, the average revenue per user (Arpu) moved up sequentially from ₹203 to ₹206 in keeping with expectations as the benefit of earlier tariff hikes gradually percolated. The segment reported Ebitda growth of 3% quarter-on-quarter (qoq) to ₹17,016 crore without substantial growth in subscribers. The fact that there were fewer days quarter-on-quarter did not help either.

O2C exposure to uncertain global trade environment

RIL’s only significant business exposed to the uncertain global trade environment in the ongoing tariff war is O2C. The segment accounted for nearly one-third of the company’s total Ebitda. In Q4FY25, O2C Ebitda grew 5% qoq to ₹15,080 crore, though it fell 10% year-on-year, indicating the worst for the segment may be behind. However, there is a fear that prolonged global trade disruption could once again put pressure on the segment’s profit.

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Transportation fuels account for nearly 60% of RIL’s refinery throughput. Petrol and diesel form a large chunk of transport fuels, while aviation turbine fuel is small. Weak demand from the EU and China and rising EV penetration have meant that Singapore refining margins on these products have shrunk 38-55% year-on-year in Q4FY25. Even in petrochemicals, ethylene prices have fallen due to large capacity additions and global inventory pile-up. Thus, petrochemical margins are unlikely to recover in a hurry from multi-year lows.

RIL dependence on domestic market

In this backdrop, RIL depended more on the domestic market, leading to 24% and 35% year-on-year growth in diesel and petrol retail volumes in Q4FY25, somewhat cushioning the impact of weaker margins.

Notably, RIL has, for the first time, talked extensively about the commissioning of new energy projects. The initial capacity of 10 GW per annum is fully integrated from polysilicon to cell manufacturing and further to solar photovoltaic (PV) module. The first line of the solar PV module has been commissioned. However, the commissioning timeline of the battery manufacturing project hasn’t been disclosed yet.

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Barring any negative surprise from O2C, the consolidated Ebitda growth rate for FY26 should pick up after almost flat growth in FY25. Nuvama Research estimates RIL’s Ebitda growth to be 16% in FY26. Their sum-of-the-parts target price for the stock is ₹1,708, nearly 30% higher than the current market price.

Disclaimer: The author holds a position in RIL.