InvestorQ : Do you see retail and digital becoming more important in Reliance results announced over the weekend for September 2022 quarter?
Rashi Mehra made post

Do you see retail and digital becoming more important in Reliance results announced over the weekend for September 2022 quarter?

Archita Jajjoo answered.
4 weeks ago

The quarterly results of Reliance Industries may be called relatively disappointing, but you need to scratch the surface and read the full story. Top line revenues continued to grow at a robust pace of 33.8% yoy and 4.4% sequentially. However, the net profits were flat yoy and down -24% sequentially. This was largely on account of compressed GRMs in the refining business and the impact of higher special additional duties on exports. That along compressed profits by Rs4,490 crore. Here is a quick gist of the Reliance numbers for the quarter, and post that we will look at the details of the number and break-up by business.

Reliance Industries

Rs in Crore






Total Income (Rs cr)

₹ 2,32,863

₹ 1,74,104


₹ 2,23,113


Operating Profit (Rs cr)

₹ 33,336

₹ 27,865


₹ 39,562


Net Profit (Rs cr)

₹ 13,656

₹ 13,680


₹ 17,955


Diluted EPS (Rs)

₹ 20.18

₹ 20.60

₹ 26.54





Net Margins




While the oil to chemicals (O2C) business came under pressure, it was the retail franchise that boosted the top line and the digital business that boosted the bottom line. But first a quick background. Addressing the shareholders at the 41st Reliance AGM in 2018, Mukesh Ambani had hinted about a very likely shift in the value creation story. He had suggested that over the next few years, the value drivers will shift from hydrocarbons to digital. What he meant was that; digital and retail would create more value for RIL in future, compared to oil and gas. In a sense, you can say that this is the first quarter when that trend is evident.

Let us look at the two important shifts that this quarterly results for Q2FY23 have highlighted for Reliance Industries. Firstly, the ability of hydrocarbons business to drive future value is coming down and that could reduce progressively in the coming years; especially for the fossil fuels business. That mantle is gradually being taken over by Digital and Retail. Most of the top line growth is coming from the expansion of retail while most of the growth in EBITDA is from digital. For the first time, EBTIDA of digital business of RIL is more than EBITDA of the oil to chemicals (O2C) business; comprising refining and petchem.

While the oil sector has had its problems on GRMs and the special additional export duties (SAED), there is a bigger structural shift that is happening. Now, Reliance is buying top line growth through retail expansion, but bottom line growth is coming through value addition in digital; thanks to higher ARPUs. While we do not have an idea about relative value mix today, it would be safe to assume that both retail and digital are now contributing more to the market cap of RIL, individually, than the O2C business. For now, O2C will be a cash cow, but growth and value equations will come from retail and digital businesses respectively.

One question that arises is whether the importance of digital and retail would still remain even with green energy being a focus or would it shift back to the energy business? Remember that, unlike digital and retail, green energy business is likely to be a lot more fluid with limited clarity on revenues and profits. In the past, green energy rarely followed a predictable path. As the payback keeps extending, companies are forced to take big decisions on milestones; to invest more or to go slow. For now, it looks like Mukesh Ambani was right when he said that “data is the new oil”.