RIL’s Q1FY25 Performance: Retail and Digital Drive Amid O2C Slump

About Stock:

Dhirubhai Ambaini started RIL in in 1966 as a small textile company which has now became a large company with holdings in petrochemicals, energy, natural gas, retail, telecommunications, energy, natural gas, retail, telecommunications, and digital services. RIL has continually pushed innovation and scaled operations to become a major power in a number of sectors under Mukesh Ambani’s direction. The biggest retailer in India, Reliance Retail Ventures Limited (RRVL), provides a wide range of goods online via JioMart, including food, gadgets, clothing, and more. With its reasonably priced 4G network, Jio Platforms has revolutionised the digital services industry in India and grown to become the country’s leading telecom operator.

Q1FY25 Performance Analysis:

Despite challenges in certain areas, Reliance Industries Limited (RIL) demonstrated solid overall performance in Q1FY25. The company’s consolidated sales reached INR 257,823 crore (approximately US $30,919 million), reflecting an 11.5% year-over-year (YoY) growth. This expansion was driven by strong contributions from key sectors, including oil and gas, retail, and digital services. However, the company’s Oil-to-Chemicals (O2C) division faced challenges due to lower refining margins and a decline in global demand.

EBITDA for the quarter increased by 2.0% YoY to INR 42,748 crore (US $5,126 million). While the O2C segment struggled, the robust performance of consumer-facing businesses, such as Retail and Digital Services, provided a counterbalance. A significant increase in production volumes from the KG-D6 block also contributed to the notable EBITDA improvement in the Oil & Gas segment.

On a quarter-over-quarter (QoQ) basis, EBITDA declined by 9.1%, primarily due to a 22% drop in O2C EBITDA, reflecting the challenging conditions in the global petrochemical and refining markets. This downturn in O2C performance also impacted the company’s profitability, with consolidated profit after tax (PAT) decreasing by 17.9% QoQ to INR 17,445 crore (US $2,092 million). Increased financing and depreciation charges further weighed on the bottom line.

Despite these challenges, RIL’s balance sheet remains strong, with a net debt reduction of INR 3,940 crore during the quarter, underscoring the company’s commitment to maintaining financial discipline and generating robust cash flows. RIL’s diversified business strategy has been key to its ability to capitalize on growth opportunities in consumer and digital sectors while navigating sector-specific obstacles.

Key Ratios:

Segment Performance Analysis:

O2C Segment:
Reliance Industries’ O2C division faced significant challenges in Q1FY25. Revenue increased by 18.1% YoY to INR 157,133 crore (US $18,844 million), while EBITDA declined by 14.3% to INR 13,093 crore (US $1,570 million). The EBITDA decline was primarily due to lower refining margins, a sharp drop in prices for petrol (-30%), polypropylene (-17%), and the polyester chain (-15%), as well as weakened global demand. Despite these hurdles, the segment benefited from strong domestic demand, particularly in polyester and polymers, and from favorable feedstock economics, as ethane was used instead of naphtha.

Oil and Gas Segment:
The Oil and Gas division delivered exceptional performance, with revenue increasing by 33.4% YoY to INR 6,179 crore (approximately US $741 million) and EBITDA rising by 29.8% to INR 5,210 crore (around US $625 million). This impressive performance was largely driven by a 43.7% YoY increase in production volumes from the KG-D6 block, resulting in 69.4 BCFe. However, a 14.2% drop in gas price realization somewhat offset the segment’s EBITDA growth. Despite declining prices, higher production volumes continued to bolster the segment.

Retail Segment:
Reliance Retail maintained its strong growth trajectory, with EBITDA increasing by 10.5% to INR 5,664 crore (US $679 million) and revenue rising by 8.1% YoY to INR 75,615 crore (US $9,068 million). The segment saw robust sales in digital products, such as air conditioners, refrigerators, and televisions, alongside strong performance in food sales, driven by summer promotions. Additionally, the company expanded its registered customer base by 18% to 316 million and added 331 new locations, bringing its total retail footprint to 18,918 stores.

Digital Services Segment:
Jio Platforms led the strong growth in the Digital Services segment, with revenue increasing by 12.8% YoY to INR 34,548 crore (US $4,143 million) and EBITDA rising by 11.9% to INR 14,638 crore (US $1,755 million). The segment also benefited from a 32.8% YoY increase in data traffic, driven by growing 5G adoption and fiber-to-the-home (FTTH) penetration. Jio’s ability to maintain its industry-leading position, despite a competitive market, underscores the effectiveness of its customer-centric approach

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