The O2C (Oil-to-Chemicals) sector in India is projected to face challenges throughout FY25 due to weak macroeconomic conditions and declining demand, particularly in petrochemicals and transportation fuels. Analysts anticipate a slow recovery and with margins remaining under pressure from geopolitical tensions and global supply issues.
In the telecom and retail sectors, Reliance Industries is expected to experience growth as the telecom segment benefits from tariff hikes and improving average revenue per user (ARPU). Meanwhile, retail faces demand softness in fashion and lifestyle categories.
With a market capitalization of Rs 17,07,785.46 crore, on Wednesday, the shares of Reliance Industries Ltd touched a day’s high of Rs. 1,269.85 which is 2.33 percent higher than the previous closing price of Rs. 1,240.90 apiece. The stock reiterated to Rs. 1,262 from the day’s high. This stock has delivered a negative return of 2.48 percent in the past year and thus underperformed the nifty index in the same period.
Brokrage Reccomdation:-
Jefferies and Bernstein, both globally reputed brokerage firm gave their own targets. The brokerage firm Jefferies maintained its “Buy” Rating with a target price of Rs. 1,690 per share, indicating a potential upside of 36 percent from Tuesday’s closing price. Further, Bernstein maintained its “Outperformed” rating with a target price of Rs. 1,520 per share, indicating a 22.5 percent upside from the previous closing price.
Brokerage rational:-
As per the brokerage, Jefferies expects Reliance Industries to restore mid-teens which might be 10 to 15 percent growth in its retail segment by FY26, with the potential listing of its telecom arm, Jio. They anticipate O2C profitability to improve and forecast a 14 percent EBITDA growth across all segments.
Bernstein expects earnings growth to be driven by Telecom, Retail, and refining, with Jio’s ARPU increasing 12 percent and supported by a 4 to 5 percent increase in subscribers and the Retail segment achieving double-digit EBITDA growth.
Financial performance:-
The company’s revenue declined 0.15 percent, from Rs 2,31,886 crore in Q2FY24 to Rs 2,31,535 crore in Q2FY25. However, net profit decreased by 2.79 percent from Rs 19,878 crore to Rs 19,323 crore in the same period.
In terms of return ratios, the return on equity for FY24 stood at 10.47 percent. The net profit margin stood at 7.90 and the debt-to-equity ratio stood at 0.6 times as of FY24.
Revenue segmentation:-
In Q2FY25, Reliance Industries revenue consists of Oil to Chemicals (O2C), which contributes around 54.05 percent, Oil and Gas contributes around 2.16 percent, Retail contributes around 26.51 percent, Digital Services contributes 13.22 percent, and the remaining 4.03 percent comes from Others.
Company profile:-
Reliance Industries Limited (RIL) is a leading Indian multinational conglomerate headquartered in Mumbai and it operates across diverse sectors such as energy, petrochemicals, retail, telecommunications, and media. The company was founded in 1958 by Dhirubhai Ambani and it has evolved from textiles to become a major player in petrochemicals and refining thus boasting the world’s largest refining complex. Their business model focuses on vertical integration, leveraging technology and innovation to improve efficiency. RIL’s extensive product range includes petroleum products, polymers, digital services, and retail offerings, making it a pivotal contributor to India’s economy and a significant player in global markets.
Written by Santhosh S
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