Base-effect saves RIL Q2; a dilemma is now coming to the fore

The O2C saw a multi-quarter low Ebitda in Q2FY25, both in absolute terms and per tonne of crude oil throughput (quantity of crude oil processed). This helped a year-on-year revival in Q2FY26. However, O2C saw 5% sequential decline in Ebitda/tonne of crude oil processed in Q2FY26. Crude oil throughput or volume was up 9% sequentially to 20.8 million tonnes, but it led to just 3% growth in absolute Ebitda as the higher procurement price of crude oil, including shipping costs, is likely to have impacted the per tonne margin adversely. Overall, RIL’s consolidated Ebitda rose 17.5% year-on-year to ₹45,885 crore.

With Q2FY26 earnings out of the way, investors may encounter a dilemma—which is the holding company discount. Jio Platforms’ listing is likely in the first half of 2026, which may be followed by Reliance Retail's listing. So, those looking to invest in these verticals may directly buy respective stocks instead of RIL shares. RIL holds a 66% stake in Jio Platforms, and it could fall to about 63% post listing, assuming minimum dilution of 2.5% as per the Securities and Exchange Board of India (Sebi’s) revised norms for listing.

Investment conundrum

For perspective, Grasim Industries holds a 56% stake in UltraTech Cement, which would not be much different from RIL’s stake in Jio Platforms after listing. Brokerages such as Motilal Oswal Financial Services and ICICI Securities have applied a discount of 35-40% to the valuation of UltraTech while calculating the sum-of-the-parts (SoTP) for Grasim. Now, there is a possibility that RIL’s stake in Jio Platforms too could be valued after applying some holding company discount, as is being done for Grasim. There is an argument being made for no or lower holding company discount in view of Jio Platforms’ small public issue size after Sebi’s relaxation of norms. But it does not have any merit as there could be enough liquidity, as private equity investors who hold about 16% stake in Jio Platforms could consider selling post listing.

Meanwhile, Reliance Retail was undergoing restructuring of operations in Q2FY25, wherein it fine-tuned B2B operations and shut down unprofitable stores. Thus, leading to about 4% revenue decline in that quarter. In this backdrop, the 19% year-on-year rise in revenue to ₹79,128 crore in Q2FY26 appears to be impressive. Nevertheless, Reliance Retail is tackling competition by reaching 600 dark stores. Compared to Blinkit, which is closing in on 2,000 dark stores, this number may appear small. But Reliance Retail’s dark stores are complementary to its vast network of 20,000 stores spread across all cities, unlike the concentrated stores of quick commerce companies, mainly in big cities. This could give Reliance Retail an edge over other quick-commerce and E-commerce companies.

Further, Jio’s average revenue per user (Arpu), though up by just 1% sequentially, rose 8% year-on-year to ₹211 as the tariff hike in July 2024 began to gradually increase Arpu from Q2FY25 onward. The management has no intention of raising tariffs further any time soon. This could lead to slower Arpu growth in H2FY26 and consequently lower Ebitda. Meanwhile, in 2025 so far, the RIL stock is up 16% versus 8% returns by the benchmark index Nifty 50, Jio Platform’s IPO remains a key near-term event for the stock.