Reliance Industries' FY25 Annual Report Analysis: 10 Key Takeaways

Reliance Industries' FY25 annual report highlights sustained free cash flow generation, disciplined capital expenditure allocation, and visible growth in consumer and new energy businesses. Jefferies maintains a Buy rating on the stock with a price target of Rs 1,670. Key takeaways include a 48% YoY increase in capitalized costs, a 14% YoY decline in consolidated capital expenditure, and strong free cash flow generation. Net debt rose 5% YoY to USD 3.3 billion, and return ratios moderated. The company is focusing on new energy projects and accelerating growth in its Retail business.

Reliance Industries' FY25 annual report has provided a comprehensive overview of the company's financial performance and strategic initiatives. The report, analyzed by Jefferies, highlights robust free cash flow generation, disciplined capital expenditure allocation, and visible growth in consumer and new energy businesses. Jefferies has maintained a Buy rating on the stock with a price target of Rs 1,670 [1].

One of the standout points is the 48% year-on-year (YoY) increase in capitalized costs, driven primarily by Jio and Retail. Capitalized costs for Jio rose 7% YoY to USD 1.2 billion, while Retail's capitalized costs increased 128% YoY to USD 2.3 billion [1]. Despite this increase, consolidated capex fell 14% YoY to USD 16.6 billion, led by Jio and standalone operations [1].

Reliance reported positive free cash flows for the second consecutive year. Consolidated operating cash flow rose 10% YoY to USD 20.9 billion, with a working capital/EBITDA conversion of 108%. Jio reported headline FCF of USD 1.8 billion, while Retail reported USD 0.6 billion [1]. Net debt rose 5% YoY to USD 3.3 billion, with Jio's net debt at USD 21.5 billion [1].

The company's return ratios moderated, with consolidated return on capital employed (ROCE) declining to 7% due to a dip in operating cash flow to operating capital employed (O2C) profitability. Retail's ROCE fell marginally to 7.2%, while Jio's ROCE was at 5.7% [1].

Reliance is focusing on new energy projects, including a 10GW poly-silicon to PV module plant, a 30GWh LFP battery cell plant, and a GW-scale electrolyser facility. These projects are scheduled for commissioning in phases across CY25-26 [1]. The Retail business remains a key focus, with Jefferies noting that "key focus is to accelerate growth in Retail already visible in 1QFY26 result" [1].

Jefferies projects continued growth in financial metrics:
- Revenue: Rs 9,646.9 in FY25E → Rs 12,268.5 in FY28E
- EBITDA: Rs 1,654.4 in FY25E → Rs 2,290.5 in FY28E
- Net Profit: Rs 696.5 in FY25E → Rs 1,032.9 in FY28E
- EPS: 51.50 in FY25E → 76.23 in FY28E [1]

Reliance maintains a sustainable competitive advantage through scale economics, cost leadership, and financial strength. The company's investment thesis emphasizes the creation of Rs 18 trillion in equity value from Rs 6 trillion in FCF invested in consumer businesses [1].

References:
[1] https://m.economictimes.com/markets/stocks/news/ril-annual-report-10-key-takeaways-from-jefferies/articleshow/123383972.cms