Reliance Earnings Beat May Lift India’s Large-cap Stocks

Reliance Industries Limited (RIL) delivered a resilient Q4 FY2024 earnings report, with its digital and retail divisions propelling a 6% year-on-year (YoY) rise in consolidated profit to ₹22,434 crore. Despite margin pressures in its energy businesses, the results underscored the diversified conglomerate’s ability to navigate macroeconomic headwinds, sparking cautious optimism about its role in lifting India’s large-cap equity market.

Growth Engines: Telecom and Retail Lead the Charge

The telecom division, Jio Platforms, remains a star performer. Its PAT surged 25.7% YoY to ₹7,022 crore, driven by a 17.7% revenue jump to ₹33,986 crore. With ARPU climbing to ₹206.2 and 5G adoption accelerating, Jio’s EBITDA margin expanded to 50.1%, reinforcing its dominance in India’s telecom landscape. Meanwhile, Reliance Retail’s revenue grew 16.3% to ₹78,622 crore, fueled by 2,659 new stores in the year. Analysts at Goldman Sachs highlighted the retail segment’s progress, noting that store rationalization and fast-fashion initiatives like Yousta are boosting sales momentum.

The oil-to-chemicals (O2C) segment, however, faced challenges. Its EBITDA fell 10% YoY to ₹15,080 crore due to weaker refining margins, a stark contrast to the 15.4% revenue growth from higher volumes. Similarly, the oil and gas division saw EBITDA dip 8.6% as operational costs rose. These headwinds underscore the fragility of RIL’s energy businesses, which remain vulnerable to global commodity cycles.

Strategic Moves Signal Confidence

The board’s decision to declare a dividend of ₹5.5 per share—the first payout since Q3 FY2024—sent a clear signal of financial health. Additionally, RIL’s approval of a ₹25,000 crore bond issuance highlights its ambition to fund future projects, including renewable energy and battery ventures. Chairman Mukesh Ambani emphasized that transitioning to renewables and advanced manufacturing would create “significant value” in the coming years.

Market Reaction and Analyst Outlook

While shares dipped 0.1% pre-earnings announcement, the stock had risen 6% year-to-date, reflecting investor faith in RIL’s long-term strategy. Analysts at CLSA and Citi maintained “Buy” and “Outperform” ratings, citing Jio’s 5G monetization potential and Retail’s store expansion. However, ICICI Securities cautioned that O2C’s margin pressures could dampen near-term profitability, projecting a 5% YoY decline in PAT.

Implications for India’s Large-cap Stocks

As a bellwether for India’s equity market, RIL’s earnings reflect broader trends in the economy. The resilience of its digital and retail divisions—key pillars of India’s consumption-driven growth—could inspire confidence in large-cap stocks across sectors. For instance, companies like HDFC Limited and Infosys, which also rely on domestic consumption and tech innovation, may see similar tailwinds.

Moreover, RIL’s fundraising plans and dividend payout align with a shift toward capital discipline among Indian corporates, a positive sign for investors seeking sustainable returns.

Conclusion

Reliance Industries’ Q4 results highlight a critical dichotomy: while its high-margin digital and retail businesses are thriving, its traditional energy divisions face structural challenges. Yet, the conglomerate’s ability to pivot toward renewables and tech-driven growth positions it as a catalyst for large-cap outperformance. With Jio’s 5G rollout and Retail’s expansion driving double-digit revenue growth, and a robust balance sheet enabling strategic investments, RIL’s trajectory could set the tone for India’s equity market in 2025.

The stock’s YTD rise of 6% and analyst upgrades suggest investors are betting on this transition. For large-cap stocks to sustain momentum, however, RIL and peers must demonstrate that growth in high-margin sectors can offset cyclical pressures in legacy businesses—a balancing act critical to India’s economic narrative.