Reliance looking at new energy & petchem as future growth drivers

ET Intelligence Group: Reliance Industries' (RIL) revenue growth of nearly 9% in the March quarter at the consolidated level was driven by the recovery in the retail segment and traction in the Jio Platforms business. The Ebitda growth at 3.6% was slower, affected by weakness in the O2C and lower gas production. With the 5G capital expenditure cycle coming to an end, the company has chalked out the next phase of expansion in the new energy and petrochemicals segments with a planned expenditure of ₹75,000 crore each.

RIL is looking forward to renewable energy as the future growth driver. Under the business segment of new energy, it has identified solar power generation, solar photovoltaic (PV) modules, battery packs and green hydrogen as focus areas, which are expected to be operational in three-four years in a phased manner.

The company has commissioned the first line of solar PV modules, which will total 10 gigawatts after completion, expandable to 20 GW. It will also undertake commissioning of 30 gigawatt hour (GWH) of battery manufacturing facility using lithium ion phosphate technology.

The company has commissioned 1 GW of solar capacity. It has earmarked 2,000 acres of land in Kandla, Gujarat for green hydrogen and related chemicals plant. The benefits of the company's shift to new energy initiatives are expected to trickle down to the financial performance by FY27-28.

Among the existing business lines, the 5G user base expanded to 191 million at the end of the March 2025 quarter from 148 million in the September 2024 quarter. The 5G data contribution reached 45% from 34% during the period. The blended average revenue per user (ARPU) increased by 13.5% year-on-year to ₹206 driven by tariff increase in July last year. The management expects further tariff benefits to accrue in the June 2025 quarter when subscribers renew annual plans.

In the retail segment, which formed 31% of the total revenue, the company undertook store rationalisation by opening 2,700 new locations while shutting down 2,200 existing ones thereby adding net 500 stores during FY25. This exercise helped in improving the segment's operating margin before depreciation and amortisation (Ebitda margin) by 20 basis points to 8.3% for FY25 amid intense competition. According to the management, there was no visible impact of the quick commerce segment on its retail activities.

The company's traditional oil-to-chemicals division, which formed over 58% of the consolidated revenue, faced pressure due to lower global demand. The segement's Ebitda margin shrank by 220 basis points to 8.8% in FY25. For FY26, the company is betting on strong domestic demand, increasing fuel sales through Jio-bp (a joint venture with British Petroleum with 1,900 outlets and Ebitda of ₹2,500 crore in FY25) and feedstock optimisation.

Analysts have retained a "buy" rating on the stock. Motilal Oswal expects consolidated Ebitda and net profit to grow by 13-14% between FY25 and FY27 driven by the telecom and retail segments. The brokerage has issue a target price of 1,515 compared with Friday's closing price of ₹1,300 on the BSE.