Is RIL's strong profit growth sustainable amid rising capital expenditure?
Reliance Industries
delivered a strong performance at the operating profit level for the June quarter driven by oil marketing, retail and digital services segments. Excluding the effect of one-time gain from the sale of investment in Asian Paints, the company reported 15% and 25% year-on-year growth in operating profit before depreciation and amortisation (Ebitda) and net profit for the quarter. A strong profit growth helped in retaining the net debt-Ebitda level at around 0.6, similar to that at the end of FY25 despite a capital expenditure of ₹29,875 crore for the quarter, up 4% year-on-year. Given this, the country's largest company by revenue and market capitalisation appears to be well placed to grow across the business segments.
In the Oil-to-Chemicals (O2C) business, which has the largest share of 56.7% in RIL's consolidated top line, the Ebitda performance was impressive despite a muted 1.5% increase in top line. The Ebitda growth of 10.8% was driven by improved realisation for transportation fuels and higher volume growth of 34.2% in diesel and 38.6% in petrol year-on-year.
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The company's telecom division, which forms over 13% of the consolidated revenue, continued to report traction in subscriber addition and average revenue per user (ARPU). The 5G user base crossed 210 million in the June quarter from 191 million at the end of March 2025. The ARPU improvement continued with the latest tally ₹208.8 from ₹206.2 in the prior quarter and ₹181.7 a year ago. Also, the sequential pace of customer addition at 9.9 million increased from 6.1 million in the previous quarter. As a result, the Jio Platform's revenue grew by 19% year-on-year to ₹35,032 crore while Ebitda rose by 24% to ₹18,135 crore.
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In the retail segment, which forms over 26% of the consolidated revenue, the store count increased by 388 to 19,592 in the June quarter. Net revenue grew by 11.3% year-on-year to ₹73,720 crore led by market leadership in grocery and fashion, despite temporary monsoon-related softness in electronics.
The overall consolidated revenue grew by 6% to ₹2.7 lakh crore year-on-year while net profit including the investment gain rose by 76.5% to ₹30,783 crore. Under its new energy initiative, it has started the execution of power generation projects in Kutch and it is in the process of setting up a transmission line to Jamnagar, Gujarat. This will aid the company's green chemicals business.
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Motilal Oswal expects consolidated Ebitda and net profit to grow by 11% annually between FY25 and FY28. It has reiterated "buy" on the stock, marginally raising the target price to ₹1,700 from 1,685. The stock was last traded at ₹1,476.9 on Friday on the BSE.
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