RIL Q2 Results Preview: Key Insights and Market Outlook Ahead of Reliance Industries’ September Quarter Report

As Reliance Industries Ltd. (RIL) prepares to announce its fiscal second-quarter earnings for the period ending September 30, 2024, market participants and investors are keenly watching for signs of both strength and potential areas of concern. Reliance, India’s largest company by market capitalization, has shown resilience despite a challenging macroeconomic environment, and its results will provide crucial insights into its diversified business portfolio, ranging from energy to retail and telecommunications.

Key Expectations from Q2 Earnings

According to recent industry estimates, RIL is expected to report a net profit of ₹16,563 crore, reflecting a healthy 9.4% rise from the previous quarter. This is particularly significant given the slightly lower revenue forecast of ₹2.35 lakh crore, a marginal decrease from ₹2.36 lakh crore in the June quarter. The numbers indicate a stable performance, with profitability rising despite revenue pressures.

A survey conducted by Moneycontrol across seven brokerages anticipated that Reliance’s revenue would dip to ₹2.31 lakh crore and that net profit would decline by 12% to ₹15,354 crore. The reported figures, however, suggest that RIL has exceeded expectations in terms of profitability, underscoring the resilience of its business model in the face of volatile market conditions.

Performance Across Key Segments

Telecommunications and Digital Services

One of the standout areas of RIL’s performance in Q2 was its telecommunications and digital services business, led by Jio Platforms. Jio’s average revenue per user (ARPU) grew by 7.4% year-on-year to ₹195.1, a significant indicator of customer engagement and value addition. The company also highlighted that 148 million of its subscribers had upgraded to its 5G services, showcasing its leadership in the burgeoning Indian 5G market.

Jio Platforms recorded a record quarterly profit of ₹6,536 crore, driven by increased ARPU and improved customer engagement metrics. RIL chairman Mukesh Ambani remarked, “Growth in Digital Services was led by increased ARPU and improving customer engagement metrics, reflecting the strong value proposition of our services.”

Jio’s progress is expected to continue as the full impact of recent tariff hikes materializes over the next few quarters, providing additional growth in both revenue and profitability.

Oil to Chemicals (O2C) Business

While the digital and telecommunications segment performed strongly, RIL’s traditional oil-to-chemicals (O2C) business faced challenges. The O2C segment, which has historically been a significant revenue driver for Reliance, was affected by unfavorable global demand-supply dynamics. This sector’s performance was weaker compared to other segments, but the company managed to partially offset the challenges with its robust growth in digital and upstream businesses.

RIL’s leadership in energy and refining has made it vulnerable to fluctuating global market conditions, particularly as the oil industry navigates uncertainty due to supply chain disruptions and shifting energy demands. Despite these headwinds, the company’s diversified approach has allowed it to mitigate significant losses.

Retail Segment Growth

Reliance Retail Ventures, another key pillar of RIL’s empire, posted strong performance in Q2, with a profit after tax of ₹2,935 crore, marking an impressive 20% growth from the previous quarter. Revenue from operations rose slightly to ₹66,502 crore from ₹66,260 crore in the June quarter, demonstrating the company’s ability to maintain its leadership position in the retail market.

Mukesh Ambani highlighted the segment’s success, saying, “The retail segment continues to increase its consumer touchpoints and product offerings across physical and digital channels. The unique omni-channel retail model enables the business to service a wide range of requirements of a vast, heterogeneous customer base.”

This success can be attributed to RIL’s continued expansion of consumer touchpoints and its diverse product offerings, which cater to both physical and digital customers. The company’s omni-channel approach has enabled it to capture a larger market share, providing it with a competitive edge over rivals in the sector.

Market Sentiment and Technical Outlook

Ahead of the earnings announcement, the broader market has shown signs of consolidation. Nifty, the benchmark index, formed a bullish harami pattern last week, suggesting the potential for a reversal after recent consolidations. Key support for Nifty has been observed around the 24,700 level. While traders remain cautious, a break below this support could signal further declines, whereas a rally above 25,000 could push the index higher, towards 25,350 or even 25,400 in the short term.

Reliance’s stock, specifically, is experiencing mixed sentiment. Following a sharp correction, the stock has formed an inverted hammer pattern, indicating the possibility of a bullish reversal. If Reliance manages to stay above the critical support level of ₹2,722, sentiment may improve, with the potential for further gains.

Outlook for Jio and Retail Segments

The earnings results will also provide further clarity on Jio’s long-term growth trajectory. With a strong presence in the Indian telecom market, Jio’s focus on 5G, growing subscriber base, and improved ARPU position it for continued growth. Analysts predict that the full benefits of its recent tariff hikes will start reflecting in the company’s results over the next 2-3 quarters, providing an added boost to the digital services arm.

For the retail segment, the outlook remains equally positive. RIL’s retail division has been expanding aggressively, and its omni-channel model has allowed it to cater to a broader consumer base. With rising consumer spending and a robust supply chain, Reliance Retail is poised for sustained growth, particularly as it continues to capitalize on both physical stores and e-commerce.

Conclusion

As Reliance Industries prepares to announce its Q2 results, the company’s strong performance across its digital, telecom, and retail sectors provides a solid foundation for continued growth. While challenges in the O2C segment remain, RIL’s diversified business model and focus on high-growth areas like telecommunications and retail offer a positive outlook. Investors will be closely watching for any updates on tariff hikes in Jio, expansion plans in retail, and strategies to navigate global challenges in the O2C business.