Reliance Industries, India's most valuable company, saw its shares climb 6% after reporting September-quarter earnings that beat analyst expectations. The jump came as stronger results in its oil-to-chemicals (O2C) business and steady growth at its telecom arm, Reliance Jio, offset a weaker performance in its retail division.
The company said net profit rose 40.6% to 255.48 billion rupees (about $3 billion), comfortably ahead of the 214.19 billion rupees analysts had forecast. The beat was driven by improved refining and petrochemical margins, which helped the O2C segment rebound after a period of softer performance.
What's behind the numbers
Reliance's O2C business—which includes refining, petrochemicals, and fuel retailing—benefited from better margins during the quarter. Refining margins, the profit a refinery makes from processing crude oil into products like gasoline and diesel, were stronger than in recent quarters. That helped offset any weakness in other parts of the energy chain.
Meanwhile, Reliance Jio, the company's telecom unit, continued to add subscribers and improve profitability. Jio has been a key growth driver for Reliance, and its steady performance provided a solid foundation for the overall results.
The retail segment, however, was softer. Reliance Retail has been spending on faster delivery options and reshaping its store network, which weighs on near-term profitability. That investment is aimed at competing more effectively in India's crowded e-commerce and retail market, but it means the division isn't contributing as much to earnings right now.
Analysts raise estimates
Following the earnings release, two brokerage firms—Jefferies, a global investment bank, and Emkay Global, an Indian brokerage—raised their earnings estimates for Reliance. They pointed to a rebound in the O2C business and better profitability at Jio as reasons for the upgrades.
This is significant because analyst estimate revisions often drive stock prices more than the initial earnings report itself. When analysts lift their forecasts, they reset the baseline that investors use to value the stock. That can extend a rally beyond the initial reaction.
What it means for investors
For everyday investors, the key takeaway is that Reliance's earnings beat wasn't just a one-off surprise. The company's core energy and telecom businesses are performing well, and analysts are adjusting their models to reflect that. That could support the stock in the coming weeks, especially if more analysts follow suit with upgrades.
But there are also reasons for caution. The retail segment's weakness is a reminder that not all parts of Reliance are firing on all cylinders. The company is making deliberate investments in retail that may take time to pay off. Investors should watch whether those investments start to translate into better retail profitability in future quarters.
Because Reliance is a heavyweight in India's Nifty 50 index, its earnings and analyst revisions can also influence broader market sentiment. Higher profit forecasts for Reliance can nudge up index-level earnings expectations, which affects how expensive or cheap Indian stocks look overall. That's something to keep in mind if you're tracking Indian equities or funds that hold them.
For context, Indian markets have been buoyed recently by falling oil prices and strong corporate earnings. Reliance's beat adds to that positive backdrop, as noted in our earlier coverage of oil retreat and Reliance's profit beat. The company's performance is also part of a broader trend of Indian companies beating expectations, as seen in Indian stocks rising on oil retreat and Reliance's beat.
Looking ahead, investors will likely focus on two things: whether refining margins stay strong, and whether Jio can keep growing without cutting into profitability. The pace of analyst estimate revisions will also be a signal. If more brokers raise their numbers, the stock could see further gains. If not, the initial pop may fade.
As always, it's important to remember that past performance doesn't guarantee future results. Reliance's diversified business model—spanning energy, telecom, and retail—offers some protection, but each segment faces its own challenges. Energy is cyclical, telecom is competitive, and retail is undergoing a costly transformation. Investors should weigh these factors when considering their exposure to the stock.
