Reliance tops estimates as petrochemicals business stands firm in a turbulent first quarter
Reliance Industries' earnings beat came despite expectations that geopolitical tensions and volatile energy markets would weigh on Reliance’s flagship oil-to-chemicals (O2C) business, which contributes more than half of
Mumbai: Reliance Industries Ltd delivered a better-than-expected start to FY27 as a resilient oil refining and petrochemicals business weathered severe disruption in global energy markets triggered by the US-Iran conflict, more than offsetting weakness in its retail arm.
The earnings beat came despite expectations that geopolitical tensions and volatile energy markets would weigh on Reliance’s flagship oil-to-chemicals (O2C) business, which contributes more than half of the company’s consolidated revenue.
India’s most valuable company reported a consolidated profit of ₹20,946 crore attributable to owners in the first quarter, ahead of a consensus estimate of ₹19,823 crore of analysts polled by Bloomberg. This was a 12% increase over the same period last year, after accounting for a one-time gain of ₹8,924 crore made then by a stake sale in Asian Paints Ltd.
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Reliance Industries reported a better-than-expected profit due to strong performance in its oil-to-chemicals (O2C) business, which significantly offset weakness in its retail arm, amidst geopolitical tensions and volatile energy markets.
The O2C segment performed well in Q1FY27, with revenues up nearly 30% year-on-year to ₹2 trillion, higher than analysts' expectations despite anticipated market turbulence.
Profit growth was mainly driven by strong performances in the O2C and digital services segments, which helped mitigate the impact of a 14% decline in retail profits.
Geopolitical tensions led to severe disruption in global energy markets, but Reliance managed to maintain strong operational performance, particularly in its petrochemicals business.
Investors might view the upcoming Jio Platforms IPO as a significant opportunity to participate in India's digital growth story, especially given Jio's strong performance and market position.
“Reliance has made a steady start to FY27, with all businesses delivering strong operating performance,” Mukesh Ambani, the company’s chairperson and managing director said in a statement. “Our diverse business portfolio has once again demonstrated its resilience in a quarter which witnessed continuing geopolitical tensions and volatile commodity markets.”
The Mumbai-headquartered heavyweight’s consolidated topline for Q1 was higher by 25% year-on-year at ₹3.1 trillion. Earnings before interest, tax, depreciation and amortization (Ebitda) grew by a tenth to ₹47,517 crore, while Ebitda margin slipped by 201 basis points (bps) to 15.2%. A hundred bps equals 1%.
“The earnings are better than expectations due to strong O2C (oil to chemicals) performance. Retail was weaker than expected,” said Harshraj Aggarwal, executive vice president-institutional equity research at Yes Securities.
Analysts had pencilled in a weaker quarter for the O2C business because of turbulence in global energy markets, the introduction of the special additional excise duty (SAED), negative marketing margins, and possible inventory losses.
However, the business reported revenues higher by nearly a third to ₹2 trillion, and Ebitda higher by a sixth to ₹17,010 crore, albeit margins shrank 100 bps.
The segment benefited from both better fuel cracks and downstream margins, according to Aggarwal. Cracks refer to the difference between the cost of crude oil and the price of refined products, with higher cracks implying better margins for refiners.
“The O2C business delivered strong performance during the quarter, supported by all-time high middle distillate cracks and improved downstream petrochemical deltas,” Ambani said.
“This was achieved despite a challenging global energy market backdrop with disrupted supply chains. Our teams navigated this difficult environment with operational agility and ensured adequate availability of essential fuels and materials in the domestic markets,” he added.
IPO-bound Jio Platforms Ltd—which comprises RIL’s telecom and digital businesses—delivered a strong performance that was in line with expectations. Revenue was up by more than a tenth to ₹39,173 crore and profit, too, rose by a tenth to ₹7,764 crore. Ebitda margin expanded 150 basis points to ₹53.3%.
The company added nearly 9 million customers during the quarter, maintaining its spot as India’s largest telecom operator with 533 million subscribers at the end of June.
“As we embark on our next phase of journey to be a publicly listed company in India, we will continue to maintain our deep tech focus and democratise access to digital connectivity and digital services in India and globally,” said Akash Ambani, managing director of Jio Platforms and Mukesh’s elder son.
Retail was the lone disappointment. While revenue was up 8% to ₹79,745 crore, profit declined 14% to ₹2,806 crore. Ebitda margin narrowed 80 bps to 7.9%.
Investors had anticipated Reliance’s strong performance, with the stock gaining 2.59% on Friday to close at ₹1,326.5 on the BSE compared to a 1.25% gain in the BSE Sensex.
About the Author
Nehal Chaliawala
Nehal chronicles India’s top conglomerates for Mint. From navigating the complexities of big-bang mergers and large-scale fundraises to decoding high-profile recruitments and seemingly inexplicable corporate pivots, Nehal focuses on unpacking the long-term strategies of the country’s most influential business houses. He aims to provide readers with a clear-eyed view of how these corporate titans shape the broader Indian economy.<br><br>His professional journey began at The Economic Times in 2018, where he spent over five years before joining Mint in 2023. Over his career, he has tracked diverse sectors like automobiles, metals, cement, power, infrastructure, and renewable energy. He also keeps a close watch on the intricacies of corporate finance and corporate governance. This wide-ranging sectoral experience allows him to better understand India’s large conglomerates that sit at the confluence of these vital industries.<br><br>Nehal studied mechanical engineering from the Pune University and graduated with distinction in 2017. Driven by a passion for storytelling, he pivoted to journalism immediately after, attending the Asian College of Journalism in Chennai. While his time in the newsroom has made him a healthy sceptic, his engineering roots keep him perpetually inquisitive about how things work—and why they fail.<br><br>He actively encourages readers to reach out for feedback, collaboration, or news tips. Nehal can be reached via LinkedIn or directly at nehal.chaliawala@livemint.com.
Source: Livemint — Companies
