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RIL: Growth baton to shift from O2C to new energy in FY28

By · Published by Everything Blog

In short

Strong fuel cracks running at double their historical averages elevated the company's refining performance, with management targeting ₹80,000 crore in annual segment earnings. Conversely, the retail branch saw muted revenue growth and compressed margins due to digital expansion, while the telecom arm posted higher average revenue per user. Net market capitalization for the core non-retail and non-telecom businesses stands at ₹5.5 trillion after accounting for holding company discounts.

Key points

  • Global oil demand headwinds will necessitate a pivot of core corporate momentum toward al…: Global oil demand headwinds will necessitate a pivot of core corporate momentum toward alternative energy operations by FY28.
  • Digital and telecom operations delivered steady gains with quarterly earnings increasing…: Digital and telecom operations delivered steady gains with quarterly earnings increasing 5% to reach ₹21,879 crore.
  • Non-telecom and non-retail business segments hold an aggregate net market capitalization…: Non-telecom and non-retail business segments hold an aggregate net market capitalization of ₹5.5 trillion under current analyst valuations.

Sources checked by our analysis pipeline: 1

Reliance Industries Ltd’s investors are in a dilemma after the September quarter (Q2FY27) results: should they celebrate the strong earnings of the oil-to-chemicals (O2C) segment or worry about the weak profitability of the retail business? This predicament assumes even more relevance as the O2C segment currently enjoys abnormal profit, raising doubts about its sustainability.

The Q2 refining margin in the two main transportation fuels – petrol and diesel – is at least twice the five-year average. In this backdrop, the O2C segment Ebitda per tonne (based on production meant for sale) soared 68% year-on-year and 28% quarter-on-quarter to ₹13,924. This mainly drove Reliance’s consolidated Ebitda growth of 23% year-on-year, surpassing most brokerages’ expectations, to ₹56,616 crore.

Global oil demand outlook is weak for 2026. A rebound is anticipated in 2027, but demand is still likely to be marginally lower than the 2025 level. Even if the geopolitical scenario improves, weak demand is not good news for margins. Also, O2C is usually assigned lower valuation multiples because of its commodity nature, so a few quarters of high profit do not lead…

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