Reliance Q2FY25 results: What led to subdued earnings for the oil-to-retail conglomerate?

During the July-September quarter, Reliance's stock declined by 4.70%, while the Nifty outperformed with a return of 7.29%.

Let’s take a closer look at the performance of RIL's key segments and see which performed the best. The main segments in which Reliance operates are Digital Services, Retail, O2C (Oil to Chemicals), and Oil & Gas.

Digital Services

This segment was the top performer in Q2FY25, reporting a revenue growth of 17.7% YoY, reaching ₹37,119 crore. PAT for this segment stood at ₹6,536 crore, up 23.4% YoY.

What drove this growth?

Revenue growth was supported by several factors: ARPU (Average Revenue Per User) grew by 7.4% YoY to ₹195.1, and there was robust data consumption growth of 24% YoY, totaling 45 billion GB.

Additionally, the company rolled out Jio True 5G services on a large scale. The rapid growth of home broadband connections and JioAirFiber (with 2.8 million connections) further contributed to this segment’s success.

Reliance remains committed to delivering value to consumers while continuing the expansion of its 5G network.

Retail Segment

This segment reported a slight decline in revenue, reaching ₹76,302 crore, down 1.1% YoY. However, EBITDA and PAT for this segment showed improvement, standing at ₹5,850 crore (+0.3% YoY) and ₹2,935 crore (+5.2% YoY), respectively.

The segment faced challenges in the fashion and lifestyle space, with weaker demand in some categories. However, the company remained focused on digital commerce and brand expansion with new launches like ASOS, Timberland, and H&M.

The youth-focused format, "Yousta," gained significant traction, expanding to 50 stores within just one year.

Oil-to-Chemicals (O2C)

Traditionally one of Reliance’s strongest and the largest segment, O2C faced challenges this quarter. Despite a 5.1% YoY increase in revenue to ₹155,580 crore, EBITDA fell sharply by 23.7%.

Why did O2C margins drop?

Global demand-supply imbalances and a steep correction in fuel cracks (about 50%) significantly impacted margins. Downstream chemical margins dropped by 9-24%, further affecting profitability.

Sluggish demand in key markets like China and the US, along with excess supply, were also headwinds for this segment. To manage the situation, Reliance optimized its operations and leveraged cheaper ethane pricing to strengthen its cracking economics.

Oil & Gas

In contrast to O2C, the oil and gas business performed better. While revenue for the segment fell by 6% YoY, reaching ₹6,222 crore, EBITDA grew by 11% YoY to ₹5,290 crore.

This growth was driven by higher production volumes from the KG-D6 block, where condensate and oil output rose by 8.2%.

Although gas price realizations dipped slightly, strong volumes helped balance the impact. Additionally, production of coal bed methane (CBM) improved.

On October 15, 2024, following the results, the stock is closed lower at ₹2,688.50, down by 2.06%.

Overall, Q2FY25 was a mixed quarter for Reliance Industries. The digital services and oil and gas segments showcased growth, while the O2C segment faced headwinds due to global economic challenges. The retail segment remained resilient, with a continued focus on digital commerce and brand expansion.