Reliance Industries: Q2-25 Earnings Call Highlights
Strong performance in the upstream & digital services offsetting muted earnings in the O2C business. Retail navigated weak market demand by streamlining operations.
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1. Key Takeaways
1.1 TLDR
Reliance Industries Limited (RIL) reported resilient earnings for Q2 FY25, with strong performance in the upstream and digital services segments offsetting muted earnings in the O2C (Oil to Chemicals) business.
The company is well-positioned to capitalize on the growth opportunities in digital services and retail, while navigating the volatility in the O2C business.
The company highlighted its focus on operational efficiency and technological innovation across its diverse portfolio.
1.2 Key Themes
Resilient performance despite challenges: RIL delivered a resilient performance in a challenging macroeconomic environment characterized by volatile energy prices and softer demand in certain segments.
Digital services drive growth: Jio Platforms continued its robust growth trajectory, driven by 5G adoption, expansion of JioAirFiber, and the introduction of new AI-powered services.
Retail focuses on operational efficiency: Reliance Retail navigated weak market demand by streamlining operations and a calibrated approach to B2B, leading to improved margins.
Upstream benefits from higher production: The Oil & Gas segment saw increased production in both KG-D6 and CBM, contributing to higher EBITDA.
O2C impacted by unfavourable market dynamics: The O2C business was impacted by significant corrections in fuel cracks and weak downstream petrochemical demand.
1.3 Consolidated Financials
Revenue: ₹2,58,027 crores (up 0.8% YoY)
EBITDA: ₹43,934 crores (down 2% YoY)
PAT: ₹19,323 crores (down 2.8% YoY)
1.4 Segment Performance
Digital Services:
Revenue and EBITDA up 18% YoY
148 million subscribers transitioned to Jio True5G
JioAirFiber connections reached 2.8 million (almost doubling QoQ)
Launched JioAICloud and Jio Brain AI platform
Retail:
Revenue: ₹76,302 crores (down 1.1% YoY)
EBITDA margin up 40 bps to 8.5%
Opened 464 new stores, expanding total retail space to nearly 80 million sq. ft.
Launched ASOS in India and partnered with Delta Galil for lingerie manufacturing
"The reported EBITDA came in at ₹5850 crore. EBITDA margin was up at 30 basis points to 8.8%." - Dinesh Taluja
Oil & Gas:
Highest ever quarterly EBITDA of ₹5,290 crores
EBITDA margin up 70 bps QoQ and 1,300 bps YoY
KGD6 production sustained at 28.5 million SCM
Increased CBM production due to higher productivity from multilateral wells
"We continue to produce about 28.5 million standard cubic meters (SCM), and an upside in production from CBM that we've seen – the multilateral wells that are currently being drilled and connected are giving us three to four times more productivity than the vertical wells that we had drilled earlier." - Sanjay Barman Roy
O2C:
Revenue down 5.1% YoY, EBITDA down 23.7% YoY
Significant decline in fuel and downstream chemical cracks
Focused on operational flexibility and domestic fuel retailing
"As you can see from the table below, in terms of where the margins were, you can see year-on-year gasoline, gasoil, ATF, all down about 50%." - V. Srikanth
1.5 Outlook
RIL expects retail growth to revert to industry-leading momentum in the next two quarters as operational improvements take effect.
Digital services are anticipated to continue their strong growth trajectory, driven by 5G and AI-powered services.
The O2C outlook remains volatile and dependent on geopolitical factors and global demand trends.
"So as the underlying thematic of the business continues to be well, but for the next one or two quarters it could be a little bit more volatile. As all these actions work its way in the next couple of quarters, post that you can see the whole. We expect it to revert back to the industry-leading momentum that we have seen. " - V. Srikanth
Reliance Industries Limited Q2 FY25 Earnings Call FAQ
1. What were the key financial highlights for Reliance Industries Limited (RIL) in Q2 FY25?
RIL reported consolidated revenue of ₹2,58,027 crores, representing a 0.8% increase year-on-year. EBITDA was ₹43,934 crores, a decrease of 2% year-on-year, and Profit After Tax (PAT) stood at ₹19,323 crores, down 2.8% year-on-year. Growth in digital services and the upstream oil and gas segment was offset by weakness in the oil-to-chemicals (O2C) business.
2. How did the Digital Services segment perform in Q2 FY25?
Digital Services witnessed robust growth, driven by rising average revenue per user (ARPU) and strong momentum in the fiber-to-the-home (FTTH) business. Revenue and EBITDA for the segment grew by 18%. Jio continues to expand its 5G network, with 148 million subscribers migrating to Jio True5G. The segment also saw strong growth in its JioAirFiber service, adding 2.8 million connections during the quarter.
3. What factors impacted the performance of the O2C business?
The O2C business faced challenges due to unfavourable demand-supply dynamics and a significant decline in fuel cracks. Globally, gasoline, gas oil, and ATF cracks decreased by approximately 50% year-on-year. Downstream petrochemical prices also weakened, falling between 9% and 24%. Lower demand for polymers and polyesters further impacted the segment's performance.
4. What were the key highlights for Reliance Retail in Q2 FY25?
Reliance Retail delivered steady performance with revenue of ₹76,302 crores. EBITDA margin from operations improved by 40 basis points to 8.5%. The company continued its focus on enhancing customer propositions and strengthening its capabilities, particularly in digital commerce. New store openings continued, adding 1.9 million square feet of retail space. The company is scaling hyperlocal deliveries, expanding its "Yousta" format, and has entered into a partnership with Delta Galil for its lingerie business.
5. What is Jio doing to improve its 5G network and customer experience?
Jio is focused on incorporating technological innovations into its True5G network, including:
True 5G voice calling (VoNR): Ensuring premium handsets prioritize VoNR for superior voice quality, faster call setup times, and enhanced security.
Advanced Interference Mitigation: Utilizing advanced Time Division Duplex (TDD) to manage interference without compromising network capacity.
Network Slicing: Creating dedicated virtual lanes within the 5G network for various traffic types (e.g., AirFiber, mobility, mission-critical services) to ensure optimal performance.
Layer Management: Optimizing spectrum allocation through carrier aggregation and advanced algorithms for energy efficiency and extended battery life on handsets.
Location Accuracy: Leveraging 5G capabilities to provide network-based location accuracy comparable to GPS, enhancing navigation and hyperlocal use cases.
Programmability and Automation: Employing advanced algorithms to dynamically adapt network elements, optimize capacity, and enable automated issue resolution.
6. How is Jio leveraging AI to enhance its offerings?
Jio is developing an AI platform called Jio Brain to power new services and experiences. Key initiatives include:
JioAICloud: Expanding cloud storage capacity for users and incorporating AI algorithms to create intelligent data management capabilities.
Enterprise Solutions: Offering AI-powered solutions for enterprises, including zero-touch operations, actionable insights, and optimization tools.
7. What is the outlook for the Oil & Gas segment?
The outlook for the Oil & Gas business remains positive, with expectations of increased production from both KG-D6 and Coal Bed Methane (CBM) fields. Strong summer demand in key markets and LNG terminal outages globally have contributed to an upward trend in gas prices, which is expected to continue.
8. What are the key strategic priorities for RIL going forward?
RIL will continue to focus on:
Strengthening its energy business and navigating price and margin volatility.
Capitalizing on the upcoming festive season to drive growth in the consumer businesses (Retail and Digital Services).
Investing in technology, streamlining operations, and enhancing customer propositions across all segments.
Expanding its presence in new areas like AI to create innovative solutions and services.
Source: Link to Earning Call Transcripts
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