Reliance Industries Limited has delivered muted financial results for the December quarter. The conglomerate's consolidated net profit remained essentially flat year-on-year, settling at ₹18,645 crore. While Ebitda showed a modest increase of 5% to reach ₹46,018 crore, the overall performance fell short of expectations.
Segment Analysis Reveals Mixed Performance
The company's oil-to-chemicals segment presented a curious picture. Benchmark Singapore gross refining margins jumped by an impressive 50% year-on-year to $7.50 per barrel. This significant improvement should have translated into strong Ebitda growth. However, the actual O2C Ebitda increased at a much slower pace of just 15% to ₹16,507 crore.
Petrochemical Weakness Dampens Results
What caused this discrepancy? The petrochemical sub-segment within O2C delivered a disappointing performance. Falling prices across the petrochemical product chain hurt earnings substantially. Additionally, volume growth in processed crude oil remained minimal at just 2%. Reduced discounts on Russian crude oil further contributed to the segment's underwhelming results.
The exploration and production segment also faced challenges. Natural decline in KG D6 gas volumes continued, with production dropping 10% year-on-year to 61.8 billion cubic feet. Consequently, E&P Ebitda declined 13% to ₹4,857 crore, despite only marginally lower gas price realization.
Retail Business Shows Growth Amid Margin Pressure
RIL's retail vertical reported net revenue growth of 9% year-on-year to ₹86,951 crore. However, this comparison requires careful interpretation. The FMCG business, now operating as Reliance Consumer Products Limited, was transferred from the retail vertical to RIL effective December 1st.
More concerning was the retail segment's margin performance. Ebitda margin hit an eleven-quarter low of 7.78%, declining by 55 basis points. This contraction resulted from investments in hyper-local commerce and a one-time impact from the new labour code implementation. As a result, retail Ebitda growth remained modest at just 2% year-on-year, reaching ₹6,770 crore.
Strategic Separations and Future Growth Drivers
Reliance Industries is undergoing significant structural changes. The company's telecom business is likely to be listed by June, followed by the retail business. These moves will leave the O2C segment as crucial for standalone financial performance.
FMCG Emerges as Potential Valuation Driver
With major verticals heading toward separate listings, attention shifts to the newly independent FMCG business. RCPL's FMCG revenue grew by an impressive 80% year-on-year in the first nine months of FY26, reaching ₹15,000 crore. The company is on track to achieve ₹20,000 crore in annual sales.
This growth trajectory has significant valuation implications. Based on market capitalization-to-sales multiples of established players like Hindustan Unilever and Britannia Industries, RIL's FMCG business could potentially add ₹1.4 trillion to the company's overall valuation. This represents approximately 7% of RIL's current total market capitalization.
Telecom Performance and Market Positioning
Jio Platforms, primarily comprising the telecom business, showed modest performance metrics. Average revenue per user increased by just 1% quarter-on-quarter to ₹214. Segment Ebitda rose 3% quarter-on-quarter to ₹19,303 crore. With mobile user base growth stagnating, another telecom tariff hike appears necessary to boost future Ebitda growth meaningfully.
Despite segment-specific challenges, Reliance Industries stock continues to trade at reasonable valuation multiples. The company currently trades at 22 times FY27 forward earnings estimates, which doesn't appear particularly expensive given its growth prospects.
Looking Ahead: Growth Challenges and Opportunities
The fundamental question facing investors is clear. After the separate listings of telecom and retail verticals, which of RIL's businesses can deliver surprising growth? While O2C and E&P segments have shown recovery, clocking 9% Ebitda growth in the first nine months of FY26, both face structural limitations.
Refining capacity isn't expanding significantly, and gas production continues to decline naturally. The new energy business remains in early development stages, though China's plan to phase out export subsidies on solar and battery products could improve global competitiveness for RIL and other Indian companies.
This context makes the strategic separation of FMCG from retail particularly significant. Investors must now hope this move pays substantial dividends in the long term. Even without factoring in FMCG's full potential, RIL's current valuation appears reasonable, suggesting the market hasn't fully priced in this emerging growth driver.
