The RIL pivot: Can Reliance Consumer Products fill the post-listing void?
RIL's Q3FY26 results were flat, with net profit at ₹18,645 crore. Despite a 50% jump in Singapore GRMs, O2C growth was stifled by petchem weakness. With Jio and Retail listings imminent, the newly separated FMCG business RCPL is being positioned as a major valuation driver.
Reliance Industries Ltd’s (RIL) December quarter (Q3FY26) results are muted. Consolidated net profit attributable to owners remained flat year-on-year to ₹18,645 crore; while Ebitda inched up by 5% to ₹46,018 crore. Net profit attributable to owners is more important than Ebitda as the latter includes earnings attributable to minority shareholders. However, Ebitda has to be analyzed to understand the operational performance, as net profit includes other income, which is non-operational in nature.
RIL’s telecom business is likely to be listed by June, followed by the retail business. This leaves the O2C (oil-to-chemicals) segment as vital for the standalone financials. Benchmark Singapore gross refining margin (GRM) increased 50% year-on-year in Q3FY26 to $7.50 per barrel. This should have translated into significant Ebitda growth. However, the O2C Ebitda grew at a much slower pace of 15% to ₹16,507 crore, with volume growth in crude oil processed at just 2%. While lower discounts on Russian crude oil could have been a dampener, a dull show from the petrochemical sub-segment within O2C also weighed on profitability. The drop in petrochemical product prices across the chain hurt earnings.
The exploration and production (E&P) segment remains vulnerable to the natural decline in KG D6 gas volumes, which dropped 10% year-on-year (y-o-y) in Q3 to 61.8 billion cubic feet. Thus, E&P Ebitda declined 13% to ₹4,857 crore even as gas price realization was marginally lower.
The net revenue of RIL’s retail vertical was up 9% y-o-y to ₹86,951 crore. The comparison is slightly distorted as the FMCG business Reliance Consumer Products Ltd (RCPL), was transferred from the retail vertical to RIL effective 1 December. The Ebitda margin hit an eleven-quarter low of 7.78%, down 55bps, as it was impacted by investments in hyper-local commerce and a one-time impact from the new labour code. Consequently, Ebitda growth was modest at 2% year-on-year to ₹6,770 crore.
- Consolidated net profit was stagnant, missing the benefit of higher refining margins due to petchem weakness.
- Jio listing is expected by June, marking the start of a major value-unlocking exercise for RIL shareholders.
- The newly independent FMCG arm RCPL is on track for ₹20,000 crore in annual sales, potentially adding ₹1.4 trillion to RIL’s valuation.
- Retail margins hit a nearly 3-year low due to labour code changes and investments in hyper-local delivery.
- Despite segment-specific drags, the stock trades at a reasonable 22x FY27 forward earnings.
Jio Platforms, that is mainly the telecom business, saw just 1% q-o-q rise in Arpu (average revenue per user) to ₹214. The segment Ebitda rose 3% q-o-q to ₹19,303 crore. Since the mobile user base has stagnated, another telecom tariff hike is needed to boost Ebitda growth ahead.
The moot question now is, after the separate listings of telecom and retail verticals, which of RIL’s businesses can surprise? While the O2C and E&P segments have bounced back, clocking 9% Ebitda growth in 9MFY26, both are unlikely to provide an impetus for future growth as refining capacity is not expanding, and gas production is falling.
The new energy business is yet to take off, but China’s plan to phase out export subsidies on solar and battery products augurs well to improve the global competitiveness of RIL and other Indian companies.
So, investors have to hope that RIL’s strategic move of separating FMCG from retail pays off materially in the long run. RCPL’s FMCG revenue grew 80% year-on-year in 9MFY26 to ₹15,000 crore, while the profitability is not disclosed yet. Based on the market capitalization-to-sales multiple of Hindustan Unilever Ltd and Britannia Industries Ltd of at least 7x for FY26, RIL’s estimated annual FMCG sales at ₹20,000 crore, could be valued at ₹1.4 trillion or 7% of its current total market capitalization. Even if FMCG’s potential isn't factored in yet, RIL stock trades at 22 times FY27 Bloomberg consensus earnings estimates, which doesn’t appear pricey.
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