Reliance shares surge post quarterly earnings: Here is what is triggering the rally

Shares of oil-to-retail conglomerate Reliance Industries may have declined over 4 per cent over the past 12 months, but were the biggest gainer on the BSE Sensex on Monday. The stock surged 5 per cent to ₹1,365.20, in turn driving the broader Sensex up over 1,000 points or 1.3 per cent. 

 

The Mukesh Ambani-led company reported better-than-expected results late last Friday and after a year of somewhat consolidation, with low single-digit growth in operating profit, analysts see strong tailwinds driving growth in the current financial year. 

 

RIL reported a fourth-quarter consolidated net profit after tax of ₹22,611 crore, up 6 per cent from a year ago profit of ₹21,243 crore, while gross revenue rose 9 per cent to ₹2,88,138 crore from ₹2,64,834 crore.

 

The earnings were largely driven by its consumer-focused businesses—retail and telecom—even as its traditional oil-to-chemicals business faced margin pressures. 

 

"RIL has three triggers in the near term. Scale up of the new energy business; upcoming tariff hikes for Jio, which has upside versus our conservative estimate of a 10 per cent hike; and potential IPO for Jio, which will drive value-unlocking for RIL. Additionally, with the completion of streamlining of operations at Reliance Retail, the retail business will sustain a healthy growth trajectory," pointed out Nomura analyst Hemang Khanna.

 

Some brokerages feel telecom companies could raise tariffs by up to 20 per cent by the end of 2025, to boost revenues and fund capital expenditures. Ailing Vodafone Idea, in particular, needs tariffs to go up as it is in need of capital to fund its 4G coverage and the ongoing 5G rollout, which began last week.

 

Jio Platforms is the largest player in the telecom industry with 488 million subscribers as of March 2025. It reported a 26 per cent rise in quarterly profit in January-March at ₹7,022 crore, while gross revenue rose 18 per cent to ₹39,853 crore. 

 

Elsewhere, Reliance Retail has seen a 29 per cent surge in fourth-quarter net profit at ₹3,545 crore, while gross revenue was up 16 per cent to ₹88,620 crore. The last financial year (2024-25) was sort of a consolidation phase for the country's largest organised retailer. While the number of stores increased to 19,340 from 18,836, the total operational area declined 2 per cent to 77.4 million square feet from 79.1 million square feet. 

 

"In FY2025, the business focused on a strategic recalibration of our store network, aimed at improving operational efficiencies and long-term sustainability," said RIL Chairman and MD Mukesh Ambani. 

 

The strong performance in Jio and retail helped offset the weakness in its main oil-to-chemicals business, where the revenue rose 15 per cent to ₹164,613 crore, but EBITDA (earnings before interest, taxes, depreciation and amortization) fell 10 per cent to ₹15,080 crore and EBITDA margin slipped to 9.2 per cent from 11.8 per cent, which Ambani attributed to significant demand-supply imbalances in downstream chemicals markets. There were pressures in the oil and gas (exploration and production) business too with both revenue and EBITDA declining. 

 

"RIL is well-positioned to benefit from rising data demand in India and an increase in telecom tariffs. Its retail business is industry-leading across grocery, fashion and consumer electronics," said Kunal Vora of BNP Paribas Securities India. 

 

Vora further pointed out that JioStar was now by far the largest content company in India by paid user base and though it doesn't contribute much to RIL's valuations, it provides RIL an edge in other ventures—consumer and telecom. 

 

Dayanand Mittal of JM Financial Institutional Securities believes RIL has "industry-leading capabilities" across businesses to drive a 15-20 per cent compounded annual growth in earnings per share over the next 3-5 years, particularly driven by both consumer businesses.

 

"We expect its net debt to decline gradually because capex will not only moderate but, importantly, also be fully funded by a gradual increase in internal cash generation. RIL's guidance on keeping reported net debt to EBITDA below 1 times (0.7 times at the end of FY2025) also gives comfort," he said.

 

Mittal expects Jio's ARPU (average revenue per user) to rise at 11 per cent CAGR over FY2024-2028. Clarity on the timeline and valuation of Jio's potential listing could be a possible near-to-medium-term trigger, he said.

Business