Focus shifts to RIL’s non-oil operations
Analysts lowered the stock’s target price after slashing earnings expectations for FY27 by 3-4%. Operating earnings before depreciation and amortization (EBIT) for the O2C segment, which contributes 57% to revenue, fell 4% year-on-year as margins fell to 7.9%, a nine-quarter low, due to supply disruptions resulting from the West Asia conflict. During an analyst call, management said O2C margins are expected to remain volatile, supported by strong crack spreads or differences between crude oil prices and finished product prices, but depressed by higher crude premium, freight and insurance costs.
Jio Platforms, which includes digital and telecommunications businesses, reported an EBITDA growth of 18%. Retail segments recorded 3% EBITDA growth.
The telecom business saw a 4% increase in average revenue per user (ARPU) to ₹214 despite no tariff increase. This increase was helped by continued subscriber momentum and an increase in home broadband. The next phase of tariff revision is not expected this quarter and growth in ARPU may remain modest and driven by continued improvement in 5G adoption – 5G subscribers accounted for 54.6% of the total subscriber base of 524.4 million in the March quarter, compared to around 27% two years ago.
According to Motilal Oswal Financial Services, the overall financial performance of the telecom segment improved in FY26 due to better free cash flow and lower capital expenditure intensity. In the retail segment, EBITDA growth for the quarter was limited to 3% despite an approximately 11% increase in revenue due to the company’s focus on increasing hyperlocal deliveries, which are inherently low-margin.
Store expansion in FY26 was offset by an increase in retail space of just over 1%. In FY27, profitability is expected to remain muted due to ongoing hyperlocal activities.
On the new energy front, the company’s 40 GWh GIGA plant is expected to become operational in the current calendar year. Commercial sales (excluding fixed consumption) are expected to start from next fiscal and may start contributing to consolidated revenue by FY30.
Motilal Oswal Financial Services reiterated a ‘buy’ rating on RIL shares but reduced the target price to ₹1,655, down over 3%. “Sustained mid-to-high growth in the retail sector and tariff hike along with the impending JPL IPO remain key triggers for RIL’s stock price,” the broker said. Shares of Reliance were last traded at ₹1,327.7 on the BSE on Friday; this was 1.2% lower than the previous day’s close.
March quarter results came in after market hours.
