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Informist, Wednesday, Apr. 23, 2025

 

By Anshul Choudhary

 

MUMBAI – Reliance Industries Ltd. is likely to see a sharp slowdown in earnings growth in the March quarter on a year-on-year basis. Its consolidated net profit is expected to fall on year, as its largest oil-to-chemicals business continues to struggle. The festival demand that boosted the retail segment's on-year performance in the previous quarter has also likely faded, which may drag down the conglomerate's overall earnings.

 

While its retail and telecommunications businesses are expected to report better performance compared with the March quarter of last year, it will not be enough to help the company repeat the previous quarter's performance, when it had reported an on-year rise in consolidated net profit after three quarters of decline. The conglomerate's consolidated net profit in Jan-Mar is likely to fall 3% on year and 1% sequentially to INR 183.57 billion, according to the average of estimates of 10 brokerages. This is a big drop from the nearly 7% on-year rise in net profit during the December quarter. The lowest net profit estimate was given by analysts at Prabhudas Lilladher at INR 166 billion, while the highest estimate was given by Equirus Securities at INR 212 billion.

 

The company's consolidated net sales during the quarter may rise a mere 1% on year, a sharp slowdown from the 7% growth in Oct-Dec. Its sales in Jan-Mar are likely to come in at INR 2.40 trillion, according to the average of estimates. The highest estimate was of INR 2.54 trillion by Emkay Global Financial Services and the lowest was of INR 2.25 trillion by Nuvama Wealth Management. 

 

Shares of Reliance Industries have been volatile since the company reported its December quarter earnings. Concerns around its earnings growth have led to selling pressure in the past few months and the reciprocal tariffs announced by the US earlier this month only added to this volatility. The stock had fallen to its 52-week low of INR 1,114.85 a few days after the US announced tariffs, but it recovered some of the losses once the US announced a 90-day pause on tariffs. Since reporting its December quarter earnings, shares of Reliance Industries have risen 2%. On Tuesday, the stock closed 0.3% lower at INR 1,291.20 on the National Stock Exchange.

 

The company's oil-to-chemicals and oil exploration business is likely to report lower operating profits on a year-on-year basis. Its digital business, which houses Reliance Jio Infocomm Ltd., is expected to remain its fastest-growing business and continues to benefit from telecom tariff hikes announced in July last year. The growth in its retail segment is likely to slow down from the previous quarter as festival-led demand will be missing in the March quarter, but the segment is still expected to report growth compared to the previous year.

 

Due to a decline in profits from the oil-to-chemicals business, which accounted for half of the sales in the previous quarter for Reliance Industries, the company's consolidated earnings before interest, taxes, depreciation, and amortisation, or EBITDA, may decline 8% on year to INR 434.18 billion.

 

SEGMENTAL PERFORMANCE

Reliance Industries' telecommunication business is likely to see strong on-year growth in the March quarter on the back of higher tariffs and subscribers. Brokerages Prabhudas Lilladher, JM Financial Institutional Securities, Kotak Institutional Equities, and Systematix Institutional Equities expect Reliance Jio's average revenue per user to rise 1-2% on quarter to INR 205-INR 208. This is likely to push up the digital service segment's EBITDA by 15-17% on year and 2-3% on quarter, as per estimates of JM Financial, Systematix, and Kotak Equities.

 

Consumer demand in its retail business, which accounted for 30% of sales in the previous quarter, came down compared with the previous quarter. This was largely on expected lines, as it is usual for demand to come down once the festival season ends, analysts said. The segment's EBITDA may fall 5-9% on quarter, estimates by JM Financial, Systematix, and Kotak Equities showed.

 

However, demand in the retail business is still better compared to the previous year and the segment's EBITDA may improve 9-11% on year. "Retail EBITDA is expected to report healthy growth...on higher area, better margins, and realizations," Kotak Equities said in its earnings preview report.

 

The company's oil-to-chemical business struggled during the March quarter due to lower gross refining margins. "Refining margins are likely to moderate sequentially, while petchem performance will continue to remain weak," Prabhudas Lilladher said in its preview report. The segment's EBITDA is likely to decline 10-14% on year, estimates showed.

 

Reliance Industries will declare its Jan-Mar earnings on Friday.

 

Following are the Jan-Mar earnings estimates for Reliance Industries based on reports from 10 brokerage firms in descending order of the estimate of net profit in INR billion:

 

Brokerage Name	Net Sales	Net Profit	EBITDA
Equirus Securities Pvt. Ltd.	2,404	212	443
Elara Securities (India) Pvt. Ltd.	2,366	192	441
Kotak Institutional Equities	2,463	187	440
Systematix Shares and Stocks (India) Ltd.	2,305	183	436
JM Financial Institutional Securities Pvt. Ltd.	2,419	183	441
ICICI Securities Ltd.	2,459	180	440
Motilal Oswal Financial Services Ltd.	2,408	180	435
Emkay Global Financial Services Ltd.	2,542	179	437
Nuvama Wealth Management Ltd.	2,252	174	431
Prabhudas Lilladher Pvt. Ltd.	2,350	166	397
Average	2,397	184	434

 

End

 

Edited by Tanima Banerjee

 

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