RIL Reports Strong Q2FY24 Performance Across Diverse Business Segments

Company Overview:

Reliance Industries Ltd is a conglomerate engaged in multiple sectors, including Oil to Chemicals (O2C), Oil and Gas, and Retail, encompassing electronics, fashion & lifestyle, grocery, and beverages, as well as Digital services. Notably, within the Digital Business, Jio stands out, contributing a significant 85% to the overall 5G capacity and ranking as India’s top 5G network. In the retail sector, footfalls reached a remarkable 260 million, showing a 41% YoY increase, and 471 new stores were added, bringing the total count to 18,650 in Q2FY24.

Retail segment achieved record EBITDA, up 41% YoY, with 260 million footfalls and an 80 bps margin expansion in Q2

In Q2FY24, the Retail segment reported revenue of 77,163 Cr, a robust 18.8% YoY growth (+10.29% QoQ). This growth was primarily attributed to the strong performance in the grocery business, which experienced a 33% YoY increase. EBITDA reached 5,820 Cr, reflecting a strong 32.10% YoY growth, with contributions from grocery and fashion & lifestyle consumption. EBITDA margins expanded by 80 basis points YoY to 7.56%, driven by festive demand. Notably, the company added 2,033 new stores YoY, including 471 new stores in Q2FY24, bringing the total count to 18,650. Footfalls reached an impressive 260 million, marking a 41% YoY increase, and registered customers grew by 27% YoY, totaling 281 million.

Digital service Growth led by strong subscriber addition-32.1 Mn YoY (11.1 Mn in Q2) & growing 5G adoption

The Digital service business reported revenue of 32,657 Cr, reflecting a growth of 10.48% YoY (+1.81% QoQ). This growth was driven by a robust net subscriber addition of 32.1 million YoY and 11.1 million in Q2FY24. EBITDA increased by 14.48% YoY (2.55% QoQ) to 14,071 Cr, with EBITDA margins expanding by 150 basis points YoY to 43.09%. The Average Revenue Per User (ARPU) grew by 2.6% YoY, reaching 181.7 Rs, with a total of 459.7 million subscribers. The company also experienced substantial growth in data traffic, which increased by 28.5% YoY to 36.3 Exabytes, driven by the growing adoption of 5G and higher engagement on home STB. Notably, over 70 million subscribers migrated to 5G, and 8,000 towns were covered with true 5G.

Robust O2C EBITDA Growth supported by strong domestic demand and tight fuels market

In Q2FY24, minor improvement in asset quality with GS3/NS3 declining to 1bps/9bps QoQ to 4.29%/1.71% with amounting GS3/NS3 stood at 4,024 Cr/1,562 Cr. Stage 2 declined 60 bps QoQ to 5.7% this resulted in 30+ dpd improving 70 bps QoQ to 10% and current level of write-off stood at 351 Cr in Q2FY24. Provision coverage on stage-3 assets stood at 61.2% against 60.1% in previous quarter. CAR strongly stood at 18.70% in Q2FY24 which is above the RBI guidelines 15%.

KG D6 gas production added sharp improvement in oil and gas Business in Q2

In Q2FY24, the Oil and Gas business reported robust revenue of 6,620 Cr, showing a significant 71.8% YoY growth (+42.9% QoQ), primarily due to the strong production from the KG D6 block, reaching 68.3 MMSCMD, marking a 65.8% YoY increase compared to 19 MMSCMD in Q2FY24. The Oil and Gas segment reported an all-time high EBITDA, growing by 50.3% YoY (+18.7% QoQ) to 4,766 Cr, driven by higher volumes and an improvement in price realization on a YoY basis. However, EBITDA margins declined by 10.31% YoY (-14.69% QoQ) to 71.99% in Q2 due to costs related to MJ field commissioning and decommissioning of the Tapti field.

Valuation and Key Ratios:

Currently, the stock is trading at a multiple of 23x EPS (TTM) of 101 Rs, with a current market price of 2,320 Rs, and an industry price-to-earnings ratio of 11.1x. The company reports an ROE of 2.27% and ROA of 1.18% in Q2FY24. The interest coverage ratio stood at 5.63x in Q2FY24, indicating the company’s solvency, while the current ratio stood at 1.16x in Q2FY24.

Q2 FY24 Results Highlights: Consolidated

➡️ In Q2FY24, consolidated revenue grew by 1.08% YoY (+11.44% QoQ) to 2,31,886 Cr, primarily due to lower O2C revenues with a 14% decline in crude oil.

➡️ Consolidated EBITDA increased by 31.98% YoY (+7.55% QoQ) to 40,968 Cr, with solid growth across all operating segments. EBITDA margins were up by 400 basis points YoY to 17.67%, due to a decline in the cost of goods sold (COGS) by 4.03% YoY but maintained a 0.69% QoQ.

➡️ PAT surged by 28.15% YoY (+8.87% QoQ) to 19,878 Cr while PAT growth in consumer business tempered by higher depreciation with growth in asset and higher network utilisation. PAT margins expanded 180 bps YoY (stable on QoQ basis) to 8.57%

➡️ Interest cost grew 25.85% YoY (-1.82% QoQ) to 5,731 Cr with gross debt stood at $35,606 Mn and net debt at $14,176 Mn. Capex stood at 38,815 Cr primarily towards 5G roll-out and building retail ecosystem.

➡️ Earnings per share (EPS) for the quarter stood at 29.36 Rs, representing significant 28.15% YoY and 8.87% QoQ growth.

Conclusion:

Reliance Industries Ltd has demonstrated strong performance across its diversified business segments, with remarkable growth in Retail, Digital services, and Oil and Gas. The company’s robust financials and its focus on expanding its 5G network and retail presence position it favorably for future growth and sustainability.