RIL earnings test after Rs 3.5 lakh crore selloff
Reliance Industries heads into first-quarter earnings needing more than a refining rebound to reverse a massive year-to-date selloff driven by weak retail and energy divisions.
Reliance Industries shares have lost Rs 3.5 lakh crore this year and sit nearly 20% below a January high of Rs 1,611.20. As the conglomerate prepares to report first-quarter results, the market is looking for a catalyst to halt the decline.
The selloff reflects investor frustration with a company whose four main engines have failed to fire simultaneously. Recent quarters brought missed profit estimates, weighed down by softer oil and gas price realisations, lower production, and festive discounting that squeezed retail margins.
The oil-to-chemicals division is expected to carry the earnings burden this quarter. Analysts broadly forecast an 8% to 10% jump in consolidated EBITDA, driven primarily by this legacy business. Kotak Equities projects O2C EBITDA will rise 12.1% year-on-year, aided by strong SEZ refinery earnings, the absence of windfall taxes, and a weaker rupee. Jefferies is more bullish, forecasting a 20% surge in O2C earnings on better petrochemical spreads and improved gross refining margins.
Refining throughput is expected to decline. YES Securities forecasts a 7.2% year-on-year drop to 16.8 million metric tonnes, with gross refining margins at $10 per barrel. JP Morgan noted that Reliance took a maintenance shutdown for one of its four crude distillation units, but added that volume losses could be offset by the weak rupee.
Retail and Jio under scrutiny
The retail unit remains the primary concern for investors who once viewed it as a major valuation trigger. Brokerages expect quarterly revenue growth between 11% and 16%, but margins are under pressure from investments in hyper-local delivery, new labour codes, and weak consumption trends. Kotak forecasts retail EBITDA will fall 2.6% sequentially, while Nuvama expects only a 3% year-on-year increase.
Jio's digital services offer cleaner growth. Nuvama expects the unit's EBITDA to rise 11% year-on-year, supported by a 3% increase in average revenue per user. YES Securities estimates telecom ARPU will reach Rs 215.4, with subscribers growing to 531.6 million. However, the numbers matter less than management's commentary. Investors are seeking concrete updates on future tariff hikes, 5G monetisation, and a listing roadmap for a potential large IPO.
Upstream oil and gas output is expected to drag on overall performance due to lower production.
The stock has partially priced in this uneven outlook. A relief rally is possible if the results show broad-based improvement and confident guidance. However, if the quarter relies solely on O2C while retail remains soft, investors are likely to delay their return to the stock.
