Reliance Industries maps its road to self-reliance

The marker of an iconic company is its ability to adapt in a dynamic world. Each time it appears that Reliance Industries (RIL) has peaked, the country’s most valued conglomerate reinvents itself. Its latest transformation centres around its bold foray into new energy. The company has commissioned the first line of solar photovoltaic module facility of 1GW. It is targeting 10GW by next year.

With its full range of renewable energy solutions—solar, energy storage, green hydrogen, bioenergy and wind—the new energy business is set to play a significant role in future growth, say experts. “During FY25, we have laid a strong foundation for our projects in renewable energy and battery operations. In the coming quarters, we will see the transition of this business from incubation to operationalisation. The new energy growth engine will create significant value for Reliance, for India and for the world,” RIL Chairman and Managing Director Mukesh Ambani said while announcing the March quarter results. In Q4FY25, RIL reported its highest-ever consolidated net profit of `19,407 crore, up 2.4% YoY. Fast growth in retail and digital offset softer earnings from energy. Consolidated gross sales jumped 8.8% to a record `2.88 lakh crore.

Overall, FY25 consolidated gross sales and net profit came in at a record `10.71 lakh crore (up 7.1% YoY) and `69,648 crore (up 0.4% YoY), respectively. In dollar terms, the $128-billion top line makes RIL bigger than the GDP of more than 130 countries.

The Transformation

RIL’s reinvention is evident in its journey from operating one of the world’s largest refineries and dominating the energy sector to becoming a major player in India’s retail and telecom sectors. The company invested `30,000 crore in retail in FY22.

Over the last decade, it has reduced its dependence on oil and gas, and shifted towards consumer and sustainable businesses. Retail accounted for 6% revenue in FY16 while refining, petrochemicals, oil and gas together made up the rest (94%). In FY25, it generated 58.5% revenue from oil to chemicals (O2C), 30.89% from retail and 14.88% from digital services.

This transformation has been protecting RIL from systematic risks. For instance, in FY25, due to high volatility in energy prices, the O2C business saw a 12% YoY drop in consolidated Ebitda to `54,988 crore. But digital services and retail witnessed 14.69% and 8.59% Ebitda growth, respectively, cushioning the fall.

Analysts are cognizant of the shifting sands. Palka Arora Chopra, Director at financial services firm Master Capital Services, says, “RIL’s diversification and focus on consumer and digital businesses have offset challenges and ensured growth. The company’s transformation is set to accelerate with its commitment to net carbon zero by 2035.” She adds that in digital ventures, the acquisition of Disney+Hotstar and IPL broadcasting rights indicate its intent to dominate the digital entertainment and streaming industry. “By 2035, green energy, consumer and digital businesses are expected to dominate the top line,” says Chopra.

“RIL’s new energy business will be the new jewel in its crown. It will become as big and profitable as the O2C business over the next five-seven years. We believe new energy, AI and Jio will drive expansion,” says Kranthi Bathini, Equity Strategist at investment management company WealthMills Securities. RIL has made significant capex allocation of `75,000 crore each in petrochemical and new energy businesses, as per a company presentation.

“This shift materially enhances RIL’s ESG narrative and long-term earnings quality, strengthened by its performance in the consumer-driven segments,” says Harshraj Vijay Aggarwal, Lead Analyst-Energy Sector, Institutional Equities Research, YES Securities.

Debt A Concern?

Reliance’s net debt stood at `1.17 lakh crore as against the cash profit of `1.47 lakh crore at the end of FY25. The borrowings may seem huge in absolute terms, but weighed against the vast operational scale and robust cash flows, are not a big cause for concern. More importantly, the debt-to-equity ratio is a modest 0.41.

Aggarwal says the net debt-to-equity ratio remains negligible given the high cash levels. Despite large ongoing investments in new energy and petrochemicals, balance sheet strength has not deteriorated, aided by controlled telecom capex, partial monetisation in retail and operating leverage.

In FY25, RIL reported a capital expenditure of `1.31 lakh crore (excluding spectrum costs), nearly all of which came from internal accruals, thereby avoiding dependence on incremental borrowings for its future growth engines in digital services, retail expansion, energy transition and new digital infrastructure.

“Reliance’s robust self-funding ability provides it the financial flexibility to pursue its strategic priorities and provide stiff competition. Ultimately, as RIL’s high growth pillars begin to generate robust Ebitda and free cash flow, they will help it achieve net zero debt,” says Chopra.

Aggarwal concurs. He says RIL is well-positioned to maintain its debt levels by improving cash flows in FY26 and FY27.

Bluest Of Blue

In the last 20 years, RIL’s consolidated net profit has grown at a compound annual growth rate (CAGR) of nearly 12% while its revenue has risen at a CAGR of 15%. Its market capitalisation has jumped to more than `19 lakh crore from around `75,000 crore two decades ago.

The bluest of the blue chip is expected to maintain robust profitability over the next five to 10 years, driven by its diverse portfolio, including oil refining, retail, and digital services (Jio).

RIL’s revenue should be about `25 lakh crore in the next 10 years, according to G. Chokkalingam, founder and head of research at investment advisory firm Equinomics Research. He says the market valuation of RIL may rise to over `40 lakh crore over the next 10 years. And like most others, he believes the growth is unlikely to be dominated by a single sector.

Meanwhile, there is a possibility of several companies from the group being listed on the stock market. Jio Financial Services made its stock market debut in August 2023. “Jio Digital could be the next one and, ultimately, retail, FMCG, new energy and others may get listed over the next 10 years. Thereby, the combined market cap of the group could even go up substantially beyond `40 lakh crore,” says Chokkalingam. RIL was the first Indian company to achieve the milestone of `10 lakh crore market cap. The analyst believes a possible listing of digital and retail businesses could give a boost to its net worth.

Aggarwal of YES Securities says RIL’s path to `20 lakh crore net worth hinges on three pillars—monetisation of Jio and Retail, scaling up new energy and O2C margin recovery.

While RIL’s push for reinvention to avoid dependency on a single sector is showing results, what would be interesting to watch is how the giant continues on this path, traverses challenges and achieves a debt-free status.

@iamrahuloberoi