Reliance Industries Ltd. – Stock Analysis(2024-25)

In this article we will try to analyze Reliance Industries Ltd. based on previous six years of financial statements viz Balance sheet, Profit and Loss statement and Cash flow statement. With this fundamental analysis we will try to gain insight into the business activities, financial health, operating efficiency and profitability of the company and finally try to derive the intrinsic value of the stock using Discounted Cash Flow method and the price at which the stock becomes attractive for long term investment. This article is divided in three sections as listed below :-
Section 1: Qualitative Fundamental Analysis comprising of General Introduction, Business overview dwelling into Business Model, Strengths and Weakness, Long Term Sustainability and finally the competitors.
Section 2:Quantitative Fundamental Analysis on Financial Health, Operating Efficiency And Profitability.
Section 3: Calculation Of Intrinsic Value.

General Introduction

Dated: 28 Feb 25
Company: Reliance Industries Ltd.
CMP: Rs. 1,207.05
Market Capitalisation: Rs. 16,33,425.07 Cr.

Share Holding Pattern:

Promoters: Mukesh Ambani
Peers: ONGC, IOC, BPCL, Airtel, Avenue Supermart

Fundamental Analysis Of Reliance Industries Ltd.

General Introduction:

Reliance Industries Limited (RIL) is a Fortune Global 500 company and the largest private sector company in India. The company was founded in 1958 as a commodities trading firm. Over the past 15 years the company has reduced its dependence on petroleum production and exploration and has diversified into other business verticals. Currently it operates a multitude of verticals including energy, retail, communication & broadcasting and financial services. As of now about 40% of the company’s revenues comes from other verticals. Its operations are spread across the globe. It is primarily a family-owned business with the Founding family holding more than 50% stake in the company.

Business Overview:
The Company operate through the following verticals

• Oil & Gas Exploration and Production
• Petrochemicals
• New Energy like Solar, wind etc.
• Media & Entertainment
• Digital Services
• Retail

Oil & Gas Exploration and Production

Domestic production surged 53.2% year-on-year, driven by increased output from the KG-D6 block, showcasing significant growth for the business. Exploration activities are actively progressing in the KG UDW1 block, alongside a multi-lateral well campaign in the CBM block. The company also produces Coal Bed Methane (CBM) from its SP Block. Reliance Gas Pipeline Limited, a subsidiary of RIL, operates the 302-kilometer Shahdol-Phulpur Pipeline, connecting Shahdol (Madhya Pradesh) to Phulpur (Uttar Pradesh), thereby integrating the CBM gas fields with the National Gas Grid and ensuring nationwide consumer access.

With the KG-D6 basin, RIL has established a natural gas-heavy portfolio, positioning itself as a key player in India’s transition to cleaner energy. Natural gas, considered a bridging fuel, is pivotal in reducing dependence on petroleum and fostering a shift toward greener alternatives. Its share in India’s energy mix is expected to rise from 6% to 15% by 2030.

RIL, which currently accounts for nearly 30% of India’s domestic gas production, is strategically equipped to address this growing demand. Ongoing development efforts aim to enhance gas production in deepwater and CBM fields, leveraging existing infrastructure to support the country’s energy transition.

Petrochemicals

Global demand for downstream chemicals remained muted, but domestic demand was robust. Despite challenges, the O2C business delivered a resilient performance. Jio-bp launched its “You Deserve More” campaign and expanded its network of fuel retailing and EV charging outlets. With over 4,500 EV charge points at strategic locations, innovative solutions, and entry into CBG retailing, Jio-bp has strengthened its low-carbon fuel portfolio.

Petrochemical intermediaries such as polyesters, polymers, and elastomers have substantial markets in China and Western countries. However, recessionary fears in developed nations and sluggish demand from China may impact margins for these products. As a major producer, China’s output also significantly influences global prices.

In India, polymer demand is projected to grow by 6-8% in FY 2024-25, supported by sectors such as construction, automotive, packaging, and consumer goods. This domestic growth presents opportunities to mitigate some of the global challenges facing the petrochemicals segment.

Media and Entertainment

The joint venture with Disney will merge Viacom18 and Star India, creating one of India’s largest media and entertainment companies. Additionally, the merger of TV18 and E18 (Moneycontrol) with Network18 has been initiated to consolidate TV and digital news assets into a single entity.

With over 900 million broadband subscribers, primarily mobile users, and 75% of small-screen usage focused on content consumption, online video is expected to be a key driver of long-term growth in the media segment. By 2030, India is projected to have 100 million connected TVs (CTVs). These devices combine the best of traditional and digital ecosystems, providing brands with opportunities to reach premium audiences intelligently. According to GroupM, CTVs will contribute 16% of TV advertising spends by 2026.

The company’s news portfolio includes CNBC TV18, CNN News, News India 18, News Network 18, and the Moneycontrol website. Beyond news, its media and content arm is expanding to serve both Hindi and non-Hindi audiences through theatrical films, direct-to-digital releases, and web series. Jio Studios has strategically penetrated regional language markets, leveraging cultural insights to craft content tailored to diverse audiences.

The media segment reinforced its market leadership across key areas. Record viewership of the Indian Premier League on JioCinema demonstrated the company’s capability to scale digital platforms rapidly. During the year, the company signed a landmark agreement with The Walt Disney Company to form a joint venture combining Viacom18 and Star India. This partnership positions the new entity as a leading television and digital streaming platform in India, further solidifying its dominance in the market.

Digital Services

Fixed broadband connections in India grew by 20% year-on-year, reaching approximately 40 million by March 2024. The deployment of next-generation fixed wireless networks, powered by 5G and point-to-multi-point UBR technology, is expected to boost demand for high-speed broadband, particularly in rural areas where last-mile infrastructure remains limited.

India’s 900+ million broadband users increasingly rely on digital services, driven by rising per capita income, the strengthening of India Stack, and the demand for convenience. According to a report by Google, Temasek, and Bain & Company titled e-Conomy India 2023, India’s internet economy is projected to grow sixfold to $1 trillion by 2030.

Jio has rolled out its True5G network nationwide, with over 108 million subscribers migrating to its 5G services. Currently, Jio’s 5G network carries nearly 30% of its mobility data traffic, all managed on its proprietary 5G+4G combo core. As the only operator in India deploying 5G on a StandAlone architecture, Jio offers unique technological advantages, including custom network slices for specific customer needs, Voice over New Radio (VoNR), and a cloud-native 5G core with advanced security.

In fixed broadband, Jio leads with around 12 million premises connected via JioFiber and JioAirFiber as of March 2024. JioAirFiber, launched in approximately 5,900 towns, has shown promising early demand. Positioned as an entertainment-first product, JioAirFiber drives 30% higher per capita usage compared to JioFiber, aided by bundled content offerings. Jio aims to expand its reach to 100 million premises using a combination of fiber and fixed wireless solutions.

Jio now accounts for approximately 60% of India’s data traffic, solidifying its position as the preferred broadband network. With over 480 million subscribers, including more than 108 million 5G users, Jio continues to dominate the market. Additionally, its JioBharat Phone has gained over 50% market share in the sub-Rs. 1,000 segment, providing affordable, data-rich experiences to users transitioning from 2G networks.

Retail

The Indian retail market ranks among the top five globally, valued at approximately $951 billion in 2023. It remains one of the fastest-growing markets worldwide and is projected to become the third-largest retail market by 2030.

This growth is driven by factors such as increasing urbanization, rising income levels, an expanding female workforce, and an aspirational youth demographic. Growth is evident across all town categories, benefiting local, regional, and international brands, which are connecting with consumers across diverse markets and actively contributing to India’s economic narrative. Grocery, fashion and lifestyle, and consumer electronics dominate the retail landscape, accounting for over 90% of the market.

Reliance Retail delivered another year of robust performance, achieving steady growth in both revenue and profit. The company opened 1,840 new stores during the year, bringing its total store count to 18,836, covering 79.1 million square feet of retail space. Strategic partnerships and acquisitions further enhanced Reliance Retail’s capabilities and product offerings. Notable acquisitions included the Sephora India franchise, the IP rights for Superdry in India, Sri Lanka, and Bangladesh, the India operations of Kiko Milano, and a majority stake in Ed-a-Mamma.

In consumer electronics, Reliance Retail is a market leader with its Reliance Digital and MyJio stores, offering diverse product assortments and strong in-store experiences. The New Commerce business through JioMart Digital (JMD) continued its expansion, adding more merchant partners to its ecosystem.

As India’s largest fashion and lifestyle retailer, Reliance Retail caters to diverse customer segments through a variety of store formats. The company launched two new store formats: ‘Swadesh,’ highlighting Indian traditions and artisan crafts, and ‘Yousta,’ a youth-focused store offering affordable fast fashion. The premium brands segment led the luxury market with an extensive brand portfolio, while the jewelry segment reported steady revenue growth through collections inspired by India’s heritage.

Reliance Retail also leads the grocery retail sector with a diverse portfolio of formats offering unique value propositions. The acquisition of Metro India strengthened its grocery operations, integrating Metro’s B2B services with its new commerce platforms for a seamless omni-channel experience. Milkbasket, a subscription-based delivery service, continued to grow, offering convenience for daily household needs.

The company further consolidated its leadership through innovative launches like Tira, an omni-channel beauty retail platform that rapidly expanded its digital and physical presence. With an expanded retail network of 18,836 stores and a 20.6% increase in retail space year-on-year, Reliance Retail continues to dominate the market. Enhancements to online platforms and new channels have significantly boosted the share of digital and new commerce in overall revenue.

The revenue breakup from various verticals is as given below:

The company does not state the geographical distribution of generated revenue in its annual reports. However, a broad classification as obtained from tradingview.com is presented below:

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Financial Ratios

Leverage Ratios

Observations:

1. The company has managed to bring down its debt during this period. In absolute terms the debt has increased by 13.36% during the period whereas the shareholder’s Equity has increased by 134%.

Operating Ratios

Observations:

1. There were two instances when the current liabilities exceeded the current assets as seen from the working capital ratio. It is considered better if a company has sufficient current assets to cover its current liabilities else it may face situations where it has to rely on external debt to meet short term working capital requirements.
2. Receivable turnover has improved during the period.

Profitability Ratios

Observations:

1. The company has managed to almost double its Profits during this period while maintaining its margins.
2. During the period it has an average ROCE of 9.09%, however, at current Enterprise Valuation, for a new investor ROCE works out to be lesser than long term Government of India Bond Coupons.

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Author
Jibu Dharmapalan
SEBI Registered Research Analyst
Registration No. INH000014678
GSTIN: 32AHVPD3247L2Z3
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References:
BSE India – RIL Annual Reports
RIL – Investors – Annual Reports

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FAQs

What is Intrinsic Value?

Ans: When someone invests in an asset, he does so in order to earn money from the business. The investor gets paid over a period of time as long as he is invested in the asset. Now intrinsic value is the present value of all such future cash flows generated by the asset. So logically one should not invest in any asset if the ask price is more than the intrinsic value of the asset.

How is Intrinsic Value of a company calculated?

Ans: For calculating the intrinsic value of a company all its future cash flows are extrapolated based on the past performance of the company, assumptions about the future growth of the company and its terminal value. Once all these are calculated these are brought to the present date based on appropriate discounting rate. The sum of all these gives the intrinsic value of the company. It may be more or less than the market capitalization of the company. If it is more than the market capitalization of the company then the company is said to be undervalued and is a good bet as a long-term investment and vice versa.

How is Intrinsic Value of a share calculated?

Ans: Once intrinsic value of a company is calculated as explained above, it is divided by the total number of outstanding shares of the company. This gives the intrinsic value of a share.

What is Discounted Cash Flow?

Ans: When we have cash flows that are spread over a period of time then Discounted Cash Flow method is used to calculate present value of all such cash flows. The present value depends on the discounting rate used. Usually 10 year Government bond yield rate(risk free rate of return) is used as the discounting rate.